A living trust is a powerful estate planning tool in California, primarily because it helps avoid probate and maintain privacy. However, not every asset belongs in a trust. Knowing what to place in your living trust—and what to leave out—can prevent unnecessary complications and ensure your plan works as intended.

 

Assets That Should Go Into a Living Trust

1. Real Estate Located in California

Your primary residence, vacation home, or rental properties in California are among the most important assets to place in your trust. Real estate held in a living trust avoids California probate, which can be time-consuming and expensive.

2. Out-of-State Real Property

If you own real estate outside California, placing it in your trust can help avoid probate in multiple states, saving your beneficiaries significant time and legal fees.

3. Bank Accounts (Checking and Savings)

Bank accounts can be retitled in the name of your trust, allowing your successor trustee to manage funds seamlessly if you become incapacitated or pass away.

4. Non-Retirement Investment Accounts

Brokerage accounts, stocks, bonds, and mutual funds that are not retirement accounts are typically excellent assets to place in a trust.

5. Business Interests

Closely held business interests, such as LLC or partnership interests, are often placed in a trust to ensure smooth management and transfer upon death or incapacity.

 

Assets That Generally Should NOT Go Into a Living Trust

1. Retirement Accounts (401(k)s, IRAs)

These accounts already pass to beneficiaries by designation and have special tax rules. Retitling them into a trust can trigger adverse tax consequences. Instead, your trust may be named as a beneficiary in limited, carefully planned situations.

2. Life Insurance Policies

Life insurance should usually remain outside the trust. The trust may be named as a beneficiary if coordinated properly, but ownership typically stays with the individual.

3. Vehicles

In California, vehicles do not go through probate in the same way as other assets. Placing cars in a trust often provides little benefit and can complicate insurance and registration issues.

4. Health Savings Accounts (HSAs)

HSAs receive special tax treatment and should generally remain in the individual’s name, with beneficiaries designated appropriately.

 

Assets That Require Special Consideration

  • Personal Property
  • Household items, jewelry, artwork, and collectibles are often transferred through a general assignment or a personal property memorandum rather than retitled individually.

 

Pay-on-Death and Transfer-on-Death Accounts

Some assets already avoid probate through beneficiary designations and may not need to be placed in a trust, depending on your overall plan.

 

The key takeaway: A living trust is only effective if it is properly funded with the right assets. In California, thoughtful coordination between your trust, beneficiary designations, and other estate planning documents is essential. An experienced estate planning attorney can help ensure your trust is structured and funded correctly—so it truly protects you and your family.