In order to take advantage of the benefits of a living trust, you must transfer property into the trust. The person who transfers property into a trust is called a "grantor." In general, your most valuable property should be placed in your trust. This may include: your house; other real estate; business interests, including stocks, bonds and mutual funds; money market accounts; brokerage accounts; royalty contracts, patents and copyrights; jewelry and antiques; precious metals; works of art; and valuable collections.
- Real Estate: Although you do not need to transfer real estate held in "joint tenancy" or "tenancy by the entirety" because it automatically transfers to the other person if one owner dies, it may still be a good idea to transfer this type of property into a living trust. This is because both owners could pass away in a common disaster, or the surviving owner could forget to place the property into a living trust at a later time. You should read your home deed to determine how the property is owned.
- Small Business Interests: If you have a small business, sole proprietorship, partnership interests, closely-held corporation or LLC, you should consider placing the interest in the living trust. Please be aware that S-corporations have restrictions on ownership by trusts.
Property that is of little value need not be placed in a living trust, because it may be exempt from probate or subject to a streamlined probate process. Other items that usually need not be included are:
- Personal Checking Accounts.
- Property that you buy or sell frequently: This is especially true if you do not expect to own the property when you die.
- Cars: Most cars are not terribly valuable and most insurance companies may be reluctant to insure a car owned by a trust. If, however, you do own a valuable car, it may make sense to check with your insurance company to see if it will insure cars owned by trusts.
- IRA's, 401(k)'s, etc.: Technically, such accounts or funds cannot be owned by a trust. You can still avoid probate on these monies if you directly name a beneficiary to receive the funds in those accounts when you die.
- Life Insurance: Your policy will directly designate a beneficiary.
- Income or Principal from another trust: If you are entitled to leave interest or principal from another trust to your own beneficiaries, you may not do so through your living trust. You may do so only through your will.
Even after transferring your property into a living trust, you can sell your property in two ways. The first, and most common, approach is simply to sell the property directly from the trust. In that situation, the seller of the property is the trust, not you. The second approach, used mostly when an institution requests it, is to transfer the property out of the trust back to you as an individual and then sell it.