Trusts are a type of estate planning tool that can provide a range of benefits for both the owners of property and their families. Establishing a trust can help give you peace and security that certain property you own will be distributed to your loved ones according to your wishes after you pass. However, some may ask, “What assets should not be in a trust in California?” Learn more and see how working with an Oceanside estate planning lawyer can help you understand what goes into a trust.

Benefits of Establishing a Trust in California

In an established trust, the one who sets up the trust, known as a grantor, gives a trustee the right to hold property or assets on their behalf, which they will distribute to designated beneficiaries in the event of the grantor’s death or legal incapacitation. Trusts can be either revocable or irrevocable, and there are benefits associated with both kinds of trusts. Revocable trusts can be modified after they are established, but irrevocable trusts cannot be in most cases.

Both irrevocable and revocable trusts can help you avoid probate, which is the legal process in which the courts determine what happens to your property when you die. Probate can be a lengthy and confusing process, and it commonly causes contention between the family members and other loved ones of the deceased.

Another key difference between irrevocable and revocable trusts is the grantor’s rights and ownership of the trust. A grantor has ownership and control over a revocable trust, but they surrender that ownership in an irrevocable trust. For this reason, irrevocable trusts offer the advantage of protection from seizure by creditors or legal claims. Consulting with a knowledgeable estate planning lawyer can help you choose the right type of trust for your circumstances.

What to Include in a Trust in California

In California, a trust is only created if there are assets to go in it. The types of assets that you might consider including in a trust could be as follows:

• Any businesses you legally own
• Checking, savings, and most other types of bank accounts
• Safe deposit boxes
• Real estate and real estate investments
• Other types of investments
• Jewelry, collectibles, and other types of tangible personal property

By putting these types of assets and property in a trust, you have control over who takes ownership of each asset when you’re gone. You don’t have to be related to someone to designate them as a beneficiary. You can even designate certain charitable organizations as beneficiaries if that’s part of your end-of-life wishes. In a revocable trust, you can change your beneficiaries as many times as you need to before your passing.

What Not to Put in Your Trust in California

There are certain types of property and assets that you cannot or should not put in a trust. The rights to some assets are simply non-transferrable, so you do not have the option from a legal perspective to include them in a trust. The types of assets that cannot be put in a trust include:

• Social Security benefits
• Health savings accounts (HSAs) and medical savings accounts (MSAs)

Additionally, cash cannot be put in a trust, but you can put it in a bank account so that it is included in your trust.

Other types of assets can be put in trust but shouldn’t because of disadvantages from a financial perspective. The following types of assets should not go in your trust for financial reasons or to avoid certain tax penalties:

• Any individual retirement accounts (IRAs) or 401(k)s
• Life insurance policies
• Joint bank accounts where the other account holder has rights of survivorship
• Motor vehicles

To better understand what you should or should not put in your trust, consider working with an experienced estate planning attorney. They can provide recommendations that protect the ideal interests of your estate.

FAQs

Q: What Cannot Be Held in a Trust?

A: Property that cannot be held in a trust includes Social Security benefits, health savings and medical savings accounts, and cash. Other types of property that should not go into a trust are individual retirement accounts or 401(k)s, life insurance policies, certain types of bank accounts, and motor vehicles. There are financial disadvantages and potential tax penalties associated with holding these types of assets in a trust.

Q: Should My Bank Account Be in My Trust?

A: Your bank account should be in your trust unless it meets certain criteria. If it is a joint account and the co-holder of the account has rights of survivorship, then there is likely not a good reason to put the account in a trust. This is because the co-holder will automatically become the owner of the account in the event of your passing. An experienced estate planning attorney can help you identify which bank accounts should be in your trust.

Q: What Are the Disadvantages of Putting Your House in a Trust in California?

A: Among the disadvantages of putting your house in a trust in California is the cost associated with creating the trust. Additionally, if the trust in which you put your house is an irrevocable trust, you lose a certain level of control because the terms of the trust cannot be changed in most cases. While these disadvantages exist, an estate planning lawyer can walk you through your options and help you determine if putting your house in a trust is advantageous.

Q: What Assets Should Be Placed in a Revocable Trust?

A: Assets that should be placed in a revocable trust typically include:

• Businesses you own
• Most types of bank accounts
• Real estate
• Investment accounts
• Safe deposit boxes
• Tangible personal property, such as jewelry, collectibles, and other types of valuables

An attorney who has experience in estate planning can help you identify the assets in your possession that should be placed in a revocable trust.

Depend on Paul V.L. Campo, Attorney at Law, for Estate Planning Support

If you’re in need of an Oceanside estate planning lawyer to guide you through trusts and the estate planning process in California, turn to Paul V.L. Campo, Attorney at Law. Our firm understands that you want to protect the well-being of your family when your life comes to an end. Work with us to plan your estate with your loved ones in mind. Contact us today for a consultation.