A Living Trust is an estate-planning tool that can help keep many of your assets out of probate. When you fund your assets to your trust, they can be passed to the trust beneficiaries without the need of going through the probate system first. The reason that assets in your trust can pass to your heirs without going through probate is that they don’t belong to you, but to the trust you created.
Fortunately, there are some assets that do not need to be funded to your trust due to the fact that they are not normally subject to probate. Some of the assets that will not need to be funded to your trust include,
Personal Belongings – There is no title to personal belongings so funding them to your trust is not necessary. In most cases families will divide personal belongings according to the deceased’s will, or as the family has agreed.
Retirement Accounts – Retirement accounts already have a named beneficiary and those accounts will pass directly to that person when the account holder passes away.
Life Insurance – Like retirement accounts, with life insurance policies there is already a beneficiary named. The policy will likely be paid to that beneficiary long before the probate process is complete.
Checking and Savings Accounts – When you open a checking or savings account, you can make that account a payable at death account. What this means is that the money in these accounts will go directly to the beneficiary that you named on the account at your death. There is no need for the money to go through probate.
Although you can make your trust the beneficiary of these types of assets, it is not usually necessary, unless you wish to protect those assets for your heirs. If you want to protect those assets for your heirs, you might then consider making your trust the beneficiary for your insurance policies and other financial accounts.