What Assets Investors Should Never Hold in a Living Trust |

I still remember the first time a client asked me, “What assets do I need to put into my living trust?” It was a simple question, but behind it was the same confusion I hear repeatedly from investors, business owners, and families working hard to build wealth.

Living trusts are powerful tools. They avoid probate, protect our privacy, and guide our loved ones clearly after we’re gone. But here’s what doesn’t get talked about enough: some assets absolutely do not belong in your living trust. And putting them there could cost you—in taxes, in legal complications, or in lost opportunities.

Over the years, I’ve seen the same few mistakes pop up. So, in this article, I want to walk you through the three big ones: the assets I never recommend including in a living trust. Getting this right can make a huge difference, especially if you’re an investor. You can catch the full video here.

What Is a Living Trust—and Why Investors Use One

A living trust is a legal entity that allows you to place your assets into a trust during your lifetime. The living trust will designate beneficiaries who will receive your assets upon your death. 

Unlike a Will, a living trust:

Avoids probate (saving time and legal costs)

Protects privacy (unlike wills, trust details aren’t public record)

Provides control over how and when assets are distributed

Can reduce estate taxes with proper structuring

For real estate investors, this means passing on properties and business interests smoothly while minimizing exposure to lawsuits and tax liability.

But that doesn’t mean all of your assets should be used to fund your living trust.

What Not to Put in Your Living Trust

1. Vehicles (Cars, Boats, Trailers, RVs, Equipment)

You might assume all titled assets should go into your living trust, but vehicles are the exception. Why?

Transferring ownership of a vehicle after death is straightforward. The DMV usually requires only a death certificate and a simple form.

Instead of retitling your car or truck into the trust, I suggest including your wishes in your personal property memorandum or final instructions. That way, your executor can easily distribute the vehicle without dragging the trust into the mix.

But liability is a bigger concern. If a vehicle titled to your trust causes an accident, a lawsuit could expose the entire trust. That’s not the kind of visibility you want for your estate.

Insurance is another issue. Many carriers struggle with vehicles titled in a trust. It can cause delays, confusion, or denial of claims. Keeping vehicles in your personal name avoids this hassle and still lets you control who gets them.

2. Retirement Accounts and Annuities

Next, let’s look at retirement accounts and annuities—things like 401(k)s, IRAs, and Roth accounts. You should never place these into your living trust. Custodians and beneficiary designations on retirement accounts already allow them to pass outside of probate.

If you move them into a trust, you might trigger a taxable event, cause early withdrawal penalties, or forfeit the tax-deferred status. Instead, I recommend naming your spouse as the primary beneficiary and your trust as the contingent one. That way, the institution transfers the account smoothly and distributes the funds according to your instructions.

This structure also helps if you have young children. If you name your kids directly and something happens to both parents, the court may appoint a custodian. Naming the trust instead ensures the trustee you select will manage and distribute those funds when the time is right.

3. Life Insurance Policies

Life insurance is another asset that causes confusion. On the surface, it seems like a good idea to include it in your trust. But because life insurance functions as a Pay-On-Death (POD) account, it avoids probate when you list a beneficiary.

Just like retirement accounts, I usually recommend naming your spouse first and the trust second. That way, if your spouse passes before you, the insurer directs the payout to your trust, where it can be managed according to your instructions.

However, in certain situations—especially if you have a high-value policy or live in a state with a low estate tax exemption—you may want to consider setting up an Irrevocable Life Insurance Trust (ILIT). For example, a $2 million estate combined with a $2 million life insurance policy can push your total assets past a $3 million exemption and trigger estate taxes. An ILIT removes the policy from your taxable estate altogether.

Key Assets to Include in a Living Trust

While vehicles, retirement accounts, and life insurance are best kept outside your trust, most other major assets should be placed in it. Here’s what I typically recommend including:

Real estate – This includes your primary residence, rental properties, vacation homes, and any undeveloped land. Transferring title to the trust helps your heirs avoid probate and ensures continuity of management.

Business interests – If you own shares in an LLC, a partnership, or a family-run corporation, placing these into the trust ensures smoother transitions and helps you dictate what happens to the business when you’re gone.

Bank accounts – Checking, savings, and certificates of deposit (CDs) can be placed into your trust to give your trustee control over liquid assets and avoid account freezes.

Brokerage accounts – Non-retirement investment accounts like those holding stocks, bonds, and mutual funds should be in the trust to simplify asset management and inheritance.

Notes payable to you – If you’ve extended loans to others, those promissory notes are valuable assets. Including them in your trust helps ensure they’re repaid to your estate.

Intellectual property and royalties – Trademarks, copyrights, patents, and any royalty streams should be titled to your trust so that future earnings are preserved and distributed according to your wishes.

Here’s the key: your living trust only works if it’s fully funded. That means retitling or transferring assets into the trust so it can actually control them. I’ve seen too many clients create a beautiful, airtight trust only to leave critical assets out of it. When that happens, the law treats those assets as if no trust exists at all.

And that means your heirs may still be forced into probate court—even if you took the time to set up a trust. Probate can be expensive, public, and time-consuming. Worst of all, it can tie up the very assets your loved ones are counting on. Leaving assets outside the trust undermines everything you set out to accomplish with your estate plan.

Why Real Estate Investors Benefit Most from Trusts

As someone who works closely with real estate investors, I see firsthand how much trusts can simplify and safeguard things. If you own properties in more than one state, you could be looking at multiple probate cases unless you have a living trust. 

With a trust, you can own property across state lines without triggering separate court processes. You get to control when and how your heirs receive income properties. You also get to outline management instructions and timelines to prevent fire sales or mismanagement.

And when you combine your trust with a solid business structure, you add a powerful layer of protection. The LLC handles liability and operations, while the trust controls inheritance and succession.

Don’t Let Probate or Taxes Derail Your Legacy

Creating a living trust is smart—but funding it correctly is critical. By knowing what to leave out and what to include, you’ll give your family clarity, control, and confidence for the future.

If you’re unsure how to set up your living trust, need help with asset transfers, or want to integrate tax-saving strategies, a qualified estate planning attorney can help. Contact Anderson Advisors, and we’ll schedule you with one of our expert team members for a free 45-minute strategy session. They’ll walk you through the legal documents, estate planning tools, and strategies you can use to create a well-funded estate plan.

Or download our free Emergency Binder and other resources to start protecting your legacy now.