When someone finishes their estate plan, the first question they usually ask is:

“So…what do I put in the trust?”

The answer surprises most people.

Not everything.

In fact, transferring certain assets into a living trust for real estate investors can trigger taxes, eliminate valuable benefits, or create unnecessary complications. 

The goal isn’t to fund your trust with everything you own. The goal is to ensure every asset passes to the next generation in the most efficient way possible.

Key Takeaways

• Not every asset belongs in your living trust, and transferring the wrong one can create unnecessary taxes or complications.
• Retirement accounts, HSAs, and annuities should usually remain in your individual name, with beneficiary designations.
• A living trust can simplify the transfer of rental properties, making it an essential tool for estate planning for landlords.
• If you own rental property through an LLC, your trust may own the LLC’s interest rather than the property itself.

Below is the list of assets that should never be included in a living trust. I review this list with clients before they transfer assets into a living trust.

If you’re looking for more guidance on creating a living trust for landlords, be sure to watch the original video and subscribe to my YouTube channel.

Why Does Funding a Living Trust Matter?

The biggest mistake I see, having created hundreds of estate plans for real estate investors, isn’t putting the wrong assets into a trust.

It’s never funding the trust at all.

Creating a living trust without transferring appropriate assets into it is like buying a safe and leaving your valuables on the kitchen counter. The trust only controls assets that actually belong to it—or assets that pass to it through beneficiary designations.

That doesn’t mean every asset belongs inside the trust. Properly funding your trust means deciding which assets to transfer into the trust, which to keep in your individual name, and which to list as beneficiaries of the trust. 

Let’s look at the seven types of assets investors commonly get wrong.

1. Retirement Accounts

Your IRA, 401(k), 403(b), and similar retirement plans should generally not be transferred into your living trust.

These retirement accounts qualify for special tax treatment. Retitling them into your trust could cause the IRS to treat the transfer as a complete distribution, resulting in immediate taxes and potential penalties.

Instead:

• Keep the account in your individual name
• Name your spouse as the primary beneficiary when appropriate
• Consider naming your living trust as a contingent beneficiary to gain additional control over how inherited funds are distributed

This approach often gives your heirs greater protection while preserving the tax advantages available under current law.

2. Health Savings Accounts (HSAs)

Health Savings Accounts work much like retirement accounts.

The law requires you to own an HSA individually, so transferring ownership to a revocable living trust can eliminate its tax advantages.

Instead, coordinate your HSA with your estate plan by updating its beneficiary designation.

For many married couples, naming a spouse allows the account to continue receiving favorable tax treatment. If someone other than your spouse inherits the account, different tax rules apply, making beneficiary planning especially important.

3. Annuities

Many retirees assume annuities belong inside a living trust because they represent a significant financial asset.

Usually, they don’t.

Changing ownership of an annuity may trigger the surrender of provisions or unexpected taxable events, depending on the contract.

Instead, keep ownership in your individual name and review the beneficiary designations.

If you want to control future distributions to your children or grandchildren, name your trust as a contingent beneficiary.

4. Life Insurance Policies

Life insurance already bypasses probate through beneficiary designations.

That means transferring ownership into a standard revocable living trust often adds paperwork without providing meaningful benefits.

A better approach is to:

• Own the policy personally
• Name primary beneficiaries
• Use your living trust as a contingent beneficiary if appropriate

There is one notable exception.

Families with large taxable estates sometimes use an Irrevocable Life Insurance Trust (ILIT) to remove insurance proceeds from their taxable estate. An ILIT is a distinct type of trust that requires careful legal planning, though.

5. Personal Vehicles

Cars, trucks, RVs, motorcycles, and boats usually don’t belong in your living trust.

Many states already offer simplified transfer procedures or Transfer-on-Death (TOD) titles for vehicles.

More importantly, placing a vehicle into your trust may actually create additional complications if you’re involved in an accident. Because ownership appears on the title, plaintiffs may name the trust as a defendant in a lawsuit, potentially drawing unnecessary attention to other trust assets.

Insurance companies may also impose additional underwriting requirements for trust-owned vehicles.

For most investors, keeping everyday vehicles titled individually is the simplest solution.

An exception may exist for valuable collector vehicles or exotic cars that represent a significant personal asset.

6. Professional Licenses and Regulated Assets

Some assets simply cannot be transferred without regulatory approval.

Examples include:

• Professional licenses
• Liquor licenses
• Certain business permits
• Industry-specific operating licenses

These assets often have strict ownership rules established by state agencies or licensing boards.

Before attempting any transfer, verify whether your governing authority permits trust ownership.

Otherwise, you may unintentionally invalidate the license or create compliance problems.

7. 529 College Savings Plans

Parents and grandparents are often surprised to learn that 529 plans should remain in the owner’s individual name.

The account structure already provides full control.

As the account owner, you are responsible for managing your assets, beneficiaries, and distributions. You can even change beneficiaries if circumstances change.

Instead of transferring ownership to your trust, review the account’s successor owner designation.

Naming your living trust as the successor owner can help ensure that someone you choose continues to manage the account if you pass away.

What Assets Should be Put Into a Living Trust?

After reading this list, you might wonder whether anything belongs in your trust.

Many assets are excellent candidates for a living trust, including:

• Your primary residence
• Valuable collectibles
• Savings, personal brokerage account, and other bank accounts
• Other valuable personal property

By transferring these assets into your trust, you help your family avoid probate and ensure your successor trustee can manage them if you become incapacitated or pass away. 

What About Investment Property Owners?

Depending on your ownership structure, you should consider transferring:

• Rental homes held personally
• Real property
• Commercial real estate
• Investment property
• Business interests, including ownership interests in LLCs and other closely held businesses 

If your rental property is already owned by an LLC, you typically don’t deed the real estate into the trust. Instead, your trust often becomes the owner of your LLC membership interest. This allows the LLC to continue operating while your heirs avoid probate.

The Goal Isn’t Putting Everything Into Your Trust

The biggest misconception about estate planning is that a living trust should own every asset you have.

That’s simply not true.

The real objective is making sure every asset transfers efficiently while minimizing taxes, protecting beneficiaries, and avoiding probate whenever possible.

Sometimes that means your trust owns the asset.

Sometimes it means your trust simply becomes the beneficiary.

Review your estate plan today to ensure every asset is titled correctly. If you’re unsure where to start, schedule an Estate Planning Strategy Session with Anderson Advisors, and we’ll help you review your plan.

Frequently Asked Questions

Who needs a living trust?

Anyone who wants to avoid probate, simplify the transfer of assets, and maintain privacy can benefit from a living trust.

Is a living trust the same as a will? 

No. Unlike a will, a living trust can help your assets avoid probate and allows your successor trustee to manage your affairs if you become incapacitated.

Does a living trust protect assets from lawsuits or keep them out of the public record?

Generally, no. A revocable living trust is designed for estate planning and probate avoidance—not lawsuit protection. Landlords and real estate investors typically use LLCs, insurance, and other asset protection strategies to reduce liability risk.

What cannot be included in your living trust under any circumstances?

Very few assets are absolutely prohibited from a living trust. Instead, avoid retitling certain assets because doing so can trigger taxes or violate ownership rules—including those covered in this article.

Will I be taxed when I transfer assets to my trust?

Generally, no. Transferring assets into a revocable living trust is not a taxable event because you still own and control the assets. In most cases, you’ll continue filing your tax returns exactly as you did before, using your Social Security Number rather than a separate tax ID. To ensure your estate transfers smoothly, you should consider your overall tax plan as you form your living trust.

How often should you review your living trust?

Review your living trust and estate planning documents every 3 to 5 years, or whenever you experience a major life event, such as buying or selling real estate, getting married or divorced, welcoming a new family member, or starting a business.

What is the cost of creating a trust?

The cost of creating a living trust varies depending on the complexity of your estate, the number of properties you own, and whether you need additional planning documents. Although online forms may cost a few hundred dollars, hiring an experienced estate planning attorney helps you properly draft, fund, and coordinate your trust with your overall estate plan.