When Considering a Trust, Take a Look at Non-Probate Assets

Although a trust can be an effective strategy for avoiding probate, an attorney that focuses on estate planning can also suggest complementary options for clients.

For starters, setting up a trust requires an individual to think about assets that are subject to probate, the degree of control — if any — that he or she would like to retain over the trust assets, any restrictions that might be associated with the trust, and the selection of an individual to serve as the trustee.

Yet not every asset may be suitable for a trust. For example, assets in a retirement account with a beneficiary designation may not necessarily have to go through probate. Such assets, also known as contract assets, may include life insurance policies, IRAs or 401(k) plans, annuities and even a bank account with a payable on death or transfer on death form — to the extent permitted by state law. In fact, California even allows an owner to add a beneficiary designation to cars and personal property. Save for real estate, contract assets can specify the distribution of most of a grantor’s assets.

Contract assets are distributed according to the terms of the specific contract. A beneficiary seeking to claim such an asset often needs only to present a valid form of identification and a death certificate.

Of course, a grantor may have concerns about how a beneficiary will use assets in a retirement account. For that reason, he or she may wish to put such assets in a trust. An attorney can work with a grantor to come up with a comprehensive estate plan that offers both flexibility and maximum benefit, possibly involving a combination of trusts, contract assets and a will.

Source: Forbes, “Should You Have a Trust?” Erik Carter, Sept. 12, 2014

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