Most valuable assets should be transferred to a revocable living trust. This would include real estate (including homes), business interests, money market accounts, stocks, bonds, mutual funds, precious metals, gems, antiques, artwork, royalty contracts, patents, copyrights, numismatic as well as other valuable collections and other business interests.
There are two (2) basic methods for transferring assets to a revocable living trust:
It is prudent to use both methods whenever possible. For example, you would list your home in the schedule and change the title as well.
Some assets should not or can not be transferred to a revocable living trust:
1. Revocable Living Trusts cannot own IRAs because an IRA, by law, must be owned by the participant, i.e., a person. Usually a beneficiary has to be a person, however, if a trust meets the following requirements, the individual beneficiary of the trust who is designated as the IRA beneficiary of the trust, being the IRA beneficiary with the shortest life expectancy (i.e. the oldest beneficiary of the trust) may be treated as the designate beneficiary, subject to the following:
(a) The trust is valid under state law;
(b) The trust is irrevocable or will, by its terms, become irrevocable upon the participant's death;
(c) The beneficiaries of the trust are identified from the trust instrument; and
(d) The plan administrator, within nine months of participant's death, must be furnished with a copy of the trust instrument.
2. Bank Accounts such as checking and savings accounts or any account that moves money frequently should not be placed into a revocable living trust. You may be able to make the trust the beneficiary of such accounts.
3. Autos / Vehicles that require insurance may be difficult to insure if placed into a revocable living trust as many insurance companies are hesitant to issue a policy when a vehicle is title to a trust. In addition, most vehicles are not very valuable and depreciate rapidly.
Assets not transferred to a living trust are subject to probate upon a person's death. Probate is the legal process by which assets are transferred to the beneficiaries listed in a last will and testament or, when there is no last will, as dictated by law. While a revocable living trust enables private transfer of assets, probate of a last will can tie up assets for an extended period of time, a minimum of six months. Unlike assets in a revocable living trust, assets subject to probate are public knowledge and come under the scrutiny of the court. For assets not in the revocable living trust at the time of death, a Pour-over Will is used to transfer them into the trust. A Pour-over Will is used to transfer or "pour" into the living trust all property not specifically transferred into the trust prior to the grantor's death. A Pour-over Will does require a probate proceeding to transfer the property to the living trust, however, in many states, a small estate procedure can be used in lieu of probate if the property outside of the trust is valued at less than $100,000.
Another use of a revocable living trust is as an asset management tool during periods of incapacity or disability. While the trustee, usually the grantor, is incapacitated, the successor trustee of the revocable living trust would manage the trust assets. The role of the successor trustee, appointed in the declaration of trust, is to assume the duties of trustee and mange trust assets when a predetermined event such as incapacity or disability occurs or upon the death of the grantor, assumed to be the original trustee.