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This is the a piece in a 8 part series on getting your financial house in order. Here are the rest of the posts. Please read them sequentially and hopefully it will help you on your path to financial independence.
- Setting up a budget/expense report: Ever wonder what should be included in a budget? We cover what you may want to consider. You can also sign up for our email list and download our free Budget crushing tool!
- Determining net worth: Do you know how to calculate your net worth? We discuss how to do it and if things like your home or cars should be included? Check it out to see what I do.
- Get you some insurance: Here we discuss what insurance you need for your family? Is an umbrella policy really necessary?
- Setting up a will or living trust and What to place in a living trust: How do you protect your family with a living trust? Why would you want one and how much will this cost? How do you do it? Check out these posts to figure it out.
- Max out the 401K, 403b, 457, or Government TSP: Ever wonder what these different accounts are? How much can you put into one versus the other? Is a Traditional or Roth plan right for you?
- Start an IRA: What is an IRA? Should you have one? How do you do a backdoor Roth?
- Pay down debt: As Dave Ramsey says, debt is bad. Still which debt should you pay down first and when can you consider paying down debt versus investing.
- Start tax advantaged accounts: Once you have done the above, what is the next thing to do with your money?
Placing assets in a living trust
This is part 2 of setting up a revocable living trust. Part 1 is here and covers how I used LegalZoom to do it. Here we will cover what assets typically goes into the trust.
Remember, the trustee is still the boss and has control over the assets. So do not fear control of assets will disappear into the abyss. They will not.
The main purpose of a trust is to avoid probate if you have expensive assets (i.e. a house). Therefore, not everything needs to go into a trust. Here I have arranged a list of things that may want to be placed into a trust.
Things that go into a trust
This is probably the biggest thing to transfer. My home is definitely my largest asset. What is required to transfer the home? A deed. We went to the title company that helped close our home, and asked them to complete a new deed transferring the title of our home to the trust. Once the deed has been written and signed, we filed it with our local Recorder's Office. This cost us $17 and was easy to do.
Life insurance policies
Request a change to the beneficiary. I was able to do this online.
If there is substantial monies in these accounts. Most people keep 3 to 6 months of savings and if you are one of those individuals then placing the savings account may make sense. I did not transfer our savings accounts as I do not have substantial emergency funds. To transfer a savings accounts typically you have to just go to the bank and let them know.
Certificate of deposit accounts
Similar to the savings accounts. If you have substantial monies then it is worth the transfer.
US Savings bonds
For savings bond it is necessary to reach out to the Department of Treasury and fill out a Form PD F 1852 Request to reissue United States Savings Bonds to the trust as seen here. Check out the government website www.tresurydirect.gov. Of note, changing the owner of the bond may result in a taxable event. So make sure this is worth it before doing so or talk to a tax professional.
Individually held stocks
This is a bit more complicated and one reason I am glad I do not yet own individual company stocks. For this you have to fill out a re-issuance of certificate request and a power of attorney for securities transfer. If you have individual stocks then check with each company to determine what needs to happen.
These are similar to stocks. You have to deliver a form to the business with the ownership certificate (if you have one). Again it may be good to check with the business regarding what else you may need to do.
Royalties, commissions, etc.
Like a bank account, you just have to reach out to the relevant parties.
Things typically not placed in Trusts
As typically there is not a ton of money in these.
IRAS and 401Ks
While I believe you can put retirement accounts in your trust, they are typically not owned by trusts. Make sure to name beneficiaries for the account and thus avoid probate. If, however, you want to leave retirement benefits to minor children or multiple people/entities, then placing them in a trust may make sense. The revocable living trust becomes the beneficiary of the IRA, 401k, or pension.
If you want to place your retirement accounts into a trust, then check with your company. Different rules apply for different accounts. Typical there are beneficiary requirements and the beneficiary must be a person or group of people. For instance, you can't leave your retirement to a church. There are tax ramifications for beneficiaries of these accounts, so seek further information.
Cars and Mobile homes
If you want to put these in the trust (not necessary), then reach out to the DMV.
Okay, so that is our primer on why to set up an irrevocable trust, how to do it, and what typically goes into the trust. Have you set one up yet?
I am Eiman Jahangir and I am a dad, husband, and cardiologist. I grew up in the South, trained in the Northeast, moved out West, and now am happily back home in the South. My wife and I have seen our fair share of ups and downs, from the pain of dealing with infertility and losing everything in a matter of hours in the Tubb’s Wildfire, to the joys of having our son and finally finding a medical practice that is right for me. It hasn’t always been easy, but I am grateful and continue to move forward in positive steps.
I write to help people looking to improve their lives. I have written my thoughts and experiences on a wide arrange of topics from parenting to finances to mindfulness. While some of my posts are more useful for doctors and other high earners, most are for everyone.