7 Things You Should Never Put in Your Trust (And Why Your Lawyer Might Not Tell You)

Summary:Don't make expensive trust mistakes. Learn the 7 assets that should never go in your revocable living trust - and the simple alternatives that actually work better. From retirement accounts to everyday checking accounts, get the straight talk your lawyer might not give you.

Here's the thing about trusts - they're like a good toolbox. Great for some jobs, terrible for others. And just like you wouldn't use a hammer to fix your computer, there are certain things that have no business being in your revocable living trust.

But first, let me address the elephant in the room. Why might your lawyer not tell you about these exclusions?

Look, most estate planning lawyers are good people trying to do right by their clients. But here's what happens: some lawyers get into a routine of putting everything they can into trusts because it sounds comprehensive. Others might not want to complicate the conversation with all the exceptions. And frankly, some just don't stay current on all the tax implications and practical problems these mistakes can cause.

At the end of the day, you deserve to know what works and what doesn't - even if it means your trust isn't stuffed full of every asset you own.

I've been helping folks with estate planning for years, and I keep seeing the same mistakes over and over. So let me save you some headaches (and money) by telling you what to keep out of that trust.

1. Your Retirement Accounts (This One's a Big Deal)

This is the granddaddy of trust mistakes, and it's expensive as all get-out.

Here's what happens: The moment you try to put your IRA or 401(k) into a trust, the IRS treats it like you cashed out the entire account. Every penny becomes taxable income - right now, all at once.

Let's say you've got a $500,000 IRA and you're 50 years old. Transfer that to a trust, and you just created a $500,000 tax bill, plus a $50,000 early withdrawal penalty. That's potentially $200,000+ in taxes you didn't need to pay.

What to do instead: Use beneficiary designations. Name your spouse first, then your kids or whoever you want. It's free, it's simple, and it keeps Uncle Sam's hands out of your pocket.

Now here's where it gets interesting: You can name your trust as a beneficiary of your retirement account, but you've got to do it right. The trust needs special language to qualify as a "see-through" trust under IRS rules. Done properly, your beneficiaries can still stretch out the distributions over their lifetimes. Done wrong, and the account has to be emptied within 5 years.

My advice? Keep it simple and name people, not trusts, unless you've got a specific reason and a lawyer who knows the retirement account rules inside and out.

2. Your Cars, Trucks, and Boats

Look, I get it. You want everything to avoid probate. But putting your everyday vehicles in a trust is like using a sledgehammer to hang a picture.

The headaches: Every time you need to register, renew, or deal with insurance, you're dealing with trust paperwork. Some states limit how many characters you can use for the owner name. Your insurance has to match exactly, or you might not be covered.

What to do instead: Most states let you add a "Transfer on Death" beneficiary to your vehicle title. Takes five minutes at the DMV, costs maybe $20, and you're done.

3. Your Professional License

This one's simple - you can't do it. Professional licenses belong to people, not trusts. Period.

Whether you're a doctor, lawyer, contractor, or hairdresser, that license is tied to you personally. The state licensing board doesn't care about your trust.

What to do instead: Focus on business succession planning and buy-sell agreements with your partners. Make sure you've got good life insurance so your family's taken care of if something happens.

4. Property with a Mortgage (But Here's What Most People Don't Know)

Now, this is where I see a lot of confusion. Some lawyers tell you not to put mortgaged property in a trust because of the "due on sale clause" - that part of your mortgage that says the bank can demand full payment if you transfer the property.

Here's the real deal: For your personal residence (1-4 family homes), federal law protects you. It's called the Garn-St. Germain Act, and it specifically allows transfers to revocable trusts without triggering that clause.

The truth is most mortgage companies couldn't care less about you putting your house in a revocable trust. I've seen thousands of these transfers, and I can count on one hand the times a lender has made a fuss about it.

That said - and this is important - get it in writing first. Call your mortgage company, tell them what you're doing, and get them to send you an email or letter saying it's fine. Takes 10 minutes, costs nothing, and gives you peace of mind.

Watch out for: Commercial properties, investment properties with 5+ units, and reverse mortgages. These don't get the same protection.

5. Your Health Savings Account (HSA)

HSAs are like the golden goose of tax advantages - you get a deduction going in, no taxes while it grows, and no taxes coming out for medical expenses.

Put it in a trust, and you just cooked that goose.

What happens: The IRS treats the transfer as a complete withdrawal. All that money becomes taxable income immediately.

What to do instead: Name your spouse as the beneficiary if you're married. They can roll it into their own HSA and keep the tax advantages. For anyone else, they'll get the money but lose the special tax treatment.

6. Your Checking and Savings Accounts (The Everyday Ones)

This might surprise you, but I usually tell people to keep their regular checking and savings accounts out of the trust.

Why? Because it's a pain in the rear. Every check, every deposit, every automatic payment needs to be in the trust's name. Banks want to see trust documents for everything. Online banking becomes a hassle.

The exception: If you're talking about significant money - say $100,000 or more - then it might be worth the trouble.

What to do instead: Most banks let you add "Payable on Death" beneficiaries to your accounts. You keep things simple while you're alive, and your family avoids probate when you're gone.

7. Firearms (This One's Tricky)

Putting guns in a regular revocable trust is like bringing a knife to a gunfight - wrong tool for the job.

The problem: Regular trusts don't have the specific language needed for firearms compliance. For certain types of firearms (like those regulated by the National Firearms Act), you could accidentally create federal crimes.

What to do instead: If you've got firearms worth planning for, get a specialized gun trust written by someone who knows the federal and state rules. For regular hunting rifles and handguns, a simple will provision usually does the trick.

The Bottom Line

Look, trusts are great tools. They help you avoid probate, keep your affairs private, and make things easier for your family. But like any tool, you've got to use them right.

Before you start moving everything into a trust, take a step back. Ask yourself: "Will this make my life easier or harder?" If it's going to create more problems than it solves, there's probably a simpler way.

And here's some free advice: don't try to do this stuff yourself. A good estate planning lawyer will save you money in the long run by keeping you out of trouble. Just like you wouldn't rewire your house or rebuild your engine without the right knowledge, don't mess around with estate planning without proper help.

At Vanderpool Law, we've been helping families navigate these trust decisions for years. We'll tell you straight what belongs in your trust and what doesn't - no fancy legal talk, just practical advice that makes sense for your situation. Because the last thing you need is an expensive mistake that could've been avoided with the right guidance from the start.

One last thing: If you've already made some of these mistakes, don't panic. Most of them can be fixed. But the sooner you deal with it, the easier (and cheaper) the fix will be.