If you’re setting up a Living Trust, you already know the importance of getting your plan right. But do you know what not to put in a trust? Including the wrong assets can lead to expensive delays, tax issues, and unnecessary complications. Here’s what to avoid… and why it matters.
6. Retirement Accounts
Avoid putting them directly into your trust.
Retirement accounts like IRAs and 401(k)s have special tax rules. Naming your trust as the beneficiary can trigger immediate income taxes and limit flexibility for heirs.
What to do instead: Name individuals or a Retirement Plan Trust as beneficiaries. Consult with your estate planning attorney for special cases.
5. The Wrong Life Insurance Beneficiary
Life insurance proceeds should align with your overall estate plan.
If your trust includes protections for your loved ones—such as for minors, special needs, or creditor concerns—naming your trust as the beneficiary is often the best choice. But many people forget to update their designations or name individuals in a way that undermines their plan.
What to do instead: Coordinate with your estate planning attorney to name the right beneficiary. Often, your revocable trust should be listed to ensure the proceeds follow your wishes and provide built-in protections.
4. Cars You Drive
Putting your daily vehicle into your trust can create headaches.
In North Carolina, transferring a car into a trust can complicate registration and insurance.
What to do instead: Keep the title in your name and use a Power of Attorney if needed during incapacity.
3. Passwords and Digital Logins
Your trust can’t manage what it can’t access. Online banking, investment platforms, cloud storage, email accounts, and social media profiles all require login credentials. Your trust won’t automatically give your Trustee access to these accounts, even if you’ve named them to handle your estate.
What to do instead: Store digital credentials separately in a secure location, like a password manager. Provide your Trustee with access instructions or a digital asset authorization.
2. Accounts You Don’t Actually Control
Don’t try to put into your trust assets that you don’t own.
This includes inherited IRAs, UTMA accounts for minor children, or employer-controlled assets like pensions or stock options.
What to do instead: Coordinate with your estate planning attorney. Use beneficiary designations or related planning tools that fit your situation.
1. Your Funeral Instructions
Your funeral wishes should never be only in your estate planning documents.
Why? Your trust might not be reviewed until after funeral plans are made. This creates stress and confusion for loved ones during an already emotional time.
What to do instead: Share funeral wishes in a separate document. Give copies to family and your Health Care Agent.
Need a Funding Audit or Trust Review?
At Clarity Legal Group®, we guide families in Wake, Durham, Orange, Pearson, Chatham counties and beyond through every step of planning for your living trust, from design to funding. Let’s make sure your plan works when it’s needed most.
Call (919) 484-0012 or schedule your consultation today.
Serving Chapel Hill, Raleigh, Cary, Durham, and the greater Triangle area.
