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The funding of a trust is necessary if you set it up as part of your estate plan but not all of your assets necessarily belong in the trust.

As you go through the process of setting up an estate plan with an “irrevocable trust” or a “revocable trust,” it is important to remember that not all of your assets necessarily belong in an irrevocable trust.

Recently, Market Watch listed some considerations about what assets to put in an irrevocable trust in “What you should know before placing assets in a trust.”

The considerations include:

  • Taxes – Assets in the irrevocable trust will be taxed differently than if you held them personally. Your irrevocable trust will not receive any of your personal tax deductions or credits.
  • Rate of Return – An important consideration is whether you can get a better return for your investments by holding them in an irrevocable trust than if you held them personally. While inflation is low at the moment, you need to get a better return than the U.S. target inflation rate of 2%, which is often easier to do in an irrevocable trust.
  • Usability – It does you little good to have assets if you cannot access them when you need them. Placing assets in an irrevocable trust can make it more difficult to spend them in an emergency.
  • Safety – As always you need to make sure that the risk/reward ratio of your investment portfolio is appropriate for your age.
  • Transfer Rules – It is important to understand the Medicaid transfer rules in your state if you are considering transferring assets to any trust and you might need long term care in the near future. Ask an elder law attorney if you are uncertain about these rules.

An estate planning attorney can help clear up the confusion that sometimes exists between an irrevocable trust and a revocable trust.

Reference: Market Watch (Feb. 25, 2016) “What you should know before placing assets in a trust.”

For more information on elder law and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.