What Assets Should Be Included in a Living Trust?

Creating a living trust is one of the most effective ways to avoid probate, protect your privacy, and simplify estate administration for your loved ones. However, one of the most common misconceptions about trusts is that simply signing the trust document is enough.

In reality, a trust only works if it actually owns your assets.

Many New Mexico residents spend time and money creating a trust but never transfer their property into it. When this happens, the trust may fail to accomplish its primary purpose, and the estate could still end up in probate court.

Understanding which assets should be included in a living trust is essential to creating an estate plan that works as intended.

What Does It Mean to Fund a Trust?

Funding a trust means transferring ownership of assets from your individual name into the name of the trust.

For example, instead of owning a home as:

"John Smith"

the property may be retitled as:

"John Smith, Trustee of the John Smith Revocable Living Trust"

The trust becomes the legal owner of the asset while you continue to control and use it during your lifetime.

A trust without assets is often referred to as an "empty trust," and an empty trust generally provides little protection from probate.

Why Funding a Trust Is So Important

Many people assume signing trust documents automatically avoids probate.

Unfortunately, that is not how trusts work.

Assets that remain in your individual name at death may still need to go through probate, even if you have a trust.

Proper funding helps:

• Avoid probate
• Simplify asset transfers
• Protect privacy
• Reduce delays
• Lower administration costs
• Provide continuity during incapacity

The trust document and the asset transfers are equally important parts of the process.

Real Estate Should Usually Be Included

For most Albuquerque residents, their home is their largest asset.

Real estate is often one of the first assets transferred into a living trust.

Examples include:

• Primary residences
• Vacation homes
• Rental properties
• Vacant land
• Investment properties

Transferring real estate into a trust often requires preparing and recording a new deed.

This step is critical because real estate held outside the trust frequently becomes subject to probate.

Bank Accounts Can Often Be Included

Many people transfer certain bank accounts into their trust.

Examples include:

• Checking accounts
• Savings accounts
• Money market accounts
• Certificates of deposit

The process typically involves working with the financial institution to retitle the account.

Trust ownership can make it easier for a successor trustee to manage finances if you become incapacitated.

Investment Accounts Are Common Trust Assets

Investment accounts are often ideal candidates for trust ownership.

Examples include:

• Brokerage accounts
• Non-retirement investment portfolios
• Mutual funds
• Individual stock holdings
• Bond accounts

Financial institutions generally have procedures for transferring ownership into a trust.

Including investment accounts can significantly reduce probate exposure.

Business Interests May Belong in a Trust

Business owners should review ownership structures as part of estate planning.

Trust ownership may be appropriate for:

• LLC interests
• Partnership interests
• Closely held corporations
• Family businesses

However, business transfers often require special planning.

Operating agreements, shareholder agreements, and tax considerations should be reviewed before making changes.

Valuable Personal Property Can Be Included

Certain personal property can also be transferred into a trust.

Examples include:

• Jewelry
• Artwork
• Collectibles
• Antiques
• Firearms
• Valuable household items

Many trust-based estate plans include assignment documents that transfer personal property into the trust.

This helps ensure these assets pass according to your wishes.

Promissory Notes and Private Loans

If someone owes you money, those rights may also be transferred into a trust.

Examples include:

• Seller-financed real estate notes
• Family loans
• Business loans
• Promissory notes

Including these assets can simplify administration and collection after death.

Mineral Rights and Oil Interests

In New Mexico, mineral rights and energy-related interests can be valuable estate assets.

These interests are often overlooked during trust funding.

Examples include:

• Oil royalties
• Gas royalties
• Mineral interests
• Lease rights

Proper transfer documentation may be necessary to ensure these assets are included in the trust.

Digital Assets Should Be Addressed

Modern estate plans increasingly include digital property.

Examples include:

• Cryptocurrency
• Online businesses
• Domain names
• Digital intellectual property
• Monetized social media accounts

Trust provisions can help ensure access and management authority for these assets.

Assets That May Not Belong in a Living Trust

Not every asset should automatically be transferred into a trust.

Some assets may be better handled through beneficiary designations or other planning strategies.

Retirement Accounts

Retirement accounts generally should not be retitled into a living trust.

Examples include:

• 401(k)s
• IRAs
• Roth IRAs
• Pension accounts

Retitling these accounts could create tax consequences.

Instead, beneficiary designations are typically used.

Trusts may sometimes be named as beneficiaries, but this requires careful planning.

Life Insurance Policies

Life insurance ownership decisions depend on the goals of the estate plan.

In many situations, changing ownership is unnecessary.

Instead, reviewing beneficiary designations may be sufficient.

Proper planning ensures benefits pass efficiently to intended recipients.

Health Savings Accounts

Health Savings Accounts (HSAs) often have special tax treatment.

These accounts are usually transferred through beneficiary designations rather than trust ownership.

Vehicles

Whether a vehicle should be transferred into a trust depends on the circumstances.

Factors include:

• Vehicle value
• State transfer procedures
• Insurance considerations
• Estate planning goals

Some clients place vehicles in trust ownership, while others use alternative transfer methods.

Common Trust Funding Mistakes

Even people who create trusts with good intentions often make mistakes.

Common examples include:

• Never transferring the home into the trust
• Forgetting investment accounts
• Failing to update beneficiary designations
• Acquiring new assets without funding them
• Assuming the trust document alone is sufficient

These mistakes frequently result in unnecessary probate proceedings.

How Often Should Trust Assets Be Reviewed?

Trust funding should not be a one-time event.

Review your trust whenever you:

• Purchase property
• Open new accounts
• Start a business
• Receive an inheritance
• Sell major assets
• Experience significant life changes

Periodic reviews help ensure your trust remains fully funded and effective.

Real Albuquerque Example

An Albuquerque homeowner created a revocable living trust several years before retirement.

The trust was properly drafted, but the family later discovered that:

• The home remained in the owner's individual name
• Several investment accounts were never transferred
• Newly acquired property was not included

As a result, a portion of the estate still required probate after death.

After reviewing the situation, Hernandez Law, LLC helped the family identify the gaps and update their trust funding strategy to avoid similar issues in the future.

This example highlights why trust funding is just as important as trust creation.

Benefits of Working With an Estate Planning Attorney

An experienced attorney can help ensure assets are properly transferred and coordinated with the overall estate plan.

Professional guidance can help:

• Avoid probate
• Identify overlooked assets
• Update ownership documents
• Coordinate beneficiary designations
• Address complex family situations

Many estate planning issues arise not because the trust was poorly written, but because it was never properly funded.

FAQ: Assets in a Living Trust

What is the most important asset to place in a trust?

For many people, their home is the most important asset because it is often the primary source of probate.

Do bank accounts need to be transferred into a trust?

Many bank accounts can be transferred into a trust, depending on your goals and financial situation.

Should retirement accounts be placed in a trust?

Generally, retirement accounts are not retitled into a trust due to potential tax consequences.

Can I add assets to my trust later?

Yes. Most revocable living trusts allow you to transfer additional assets at any time during your lifetime.

What happens if an asset is left out of the trust?

The asset may need to pass through probate unless another transfer mechanism applies.

Call to Action

A living trust can only protect assets that are properly included and funded. If you're unsure whether your trust is complete, a review can help identify potential gaps before they become costly problems.

At Hernandez Law, LLC, we help Albuquerque families create and maintain effective trust-based estate plans designed to avoid probate and protect loved ones.

Call (505) 228-5912 today to schedule a consultation.

Hernandez Law, LLC
1331 Park Ave SW Unit #908
Albuquerque, NM 87102

By appointment only.