Setting up a trust can be one of the smartest moves in estate planning. It allows you to pass assets to your heirs while avoiding probate, preserving privacy, and maintaining some control over how your wealth is distributed. But just because trusts are powerful tools doesn’t mean every asset belongs in one.
In fact, putting the wrong things into a trust can trigger unintended tax consequences, disqualify you from certain benefits, or even create legal headaches for your loved ones later. Yet many people still blindly move everything they own into a trust because someone told them to, or because they read it was the “responsible” thing to do.
Unfortunately, that blanket approach can backfire. Some assets are best left out of your trust, either because they already come with built-in beneficiary designations or because they can lose value, create liabilities, or cause unnecessary complexity when included.
If you’re planning your estate or helping a parent or spouse plan theirs, here are ten things you should think twice about putting into a trust fund.
10 Things You Should Never Put In a Trust Fund
1. Retirement Accounts (IRAs, 401(k)s, etc.)
Retirement accounts like traditional IRAs and 401(k)s should not be retitled into a trust during your lifetime. Doing so can trigger immediate taxation.
These accounts are tax-deferred, and ownership changes, like transferring them into a trust, are treated as distributions by the IRS. That means you could owe income tax on the entire balance just for moving it.
Instead, if you want your trust to manage how retirement funds are distributed after your death, name the trust as a beneficiary, not the owner. However, even that comes with caveats—naming a trust can limit stretch options for heirs and accelerate required withdrawals. Work with a financial advisor or estate attorney before making any moves involving retirement accounts and trusts.
2. Health Savings Accounts (HSAs)
Like retirement accounts, HSAs are individually owned, tax-advantaged accounts that can’t legally be transferred to a trust while you’re alive.
If you try to move an HSA into a trust, you’ll lose the account’s tax benefits and likely incur an early withdrawal penalty, depending on your age. The better approach is to name a beneficiary for your HSA, such as a spouse or adult child, so the account is distributed directly upon your death. A trust has no role in managing an HSA during your life.
3. Vehicles (Unless They’re Valuable Collectibles)
People often assume they should put everything they own into their trust, including their car, RV, or boat. But in most cases, vehicles are not ideal trust assets.
Transferring a car into a trust can create insurance complications, DMV paperwork headaches, and confusion about liability if an accident occurs. For everyday vehicles, it’s usually easier to leave them out of the trust and use a transfer-on-death (TOD) designation instead (available in many states).
That said, rare or high-value collectible cars might make sense to include, but even then, you’ll want to speak with an attorney who understands how to handle title, insurance, and valuation properly.
4. Everyday Bank Accounts (Without a Clear Purpose)
While you may want your savings or investment accounts in a trust, it’s often a mistake to put your everyday checking account into one, especially if you actively use it to pay bills, make purchases, or receive deposits.
Putting a daily-use account into a trust can create awkward scenarios where trustees must authorize transactions or where banks flag the account for additional review. It can also slow down your ability to access your own money if the trust terms are too restrictive.
Instead, keep your personal checking separate, and reserve trust account ownership for funds that are meant to be passed on, not actively spent.
5. Life Insurance (in Some Cases)
This one’s tricky. Some people benefit from putting life insurance into an irrevocable life insurance trust (ILIT) to avoid estate tax or control payout terms, but not everyone needs this level of planning.
In most cases, life insurance proceeds go directly to named beneficiaries and bypass probate altogether. That means you may not need to involve a trust at all.
In fact, naming your trust as the beneficiary of your life insurance can cause delays in payment and create unnecessary complications—unless there’s a very specific reason for it, like shielding assets from a beneficiary with poor financial judgment. Talk with your estate planner before naming a trust as your insurance beneficiary. It’s not one-size-fits-all.
6. Personal Property With No High Monetary Value
It’s tempting to put things like furniture, clothing, electronics, or sentimental keepsakes into a trust to avoid family disputes. But legally, these items don’t require formal inclusion in your trust unless they have a high appraised value (such as fine art or rare antiques).
Most everyday personal items can be addressed in a personal property memorandum, which is a written document that accompanies your will or trust and outlines who should receive specific items.
Putting low-value personal property into a trust can overcomplicate your estate and require needless documentation. Keep it simple where you can.
7. Property With Environmental Hazards
Own a piece of land that might contain underground fuel tanks, asbestos, old septic systems, or other environmental risks? Think twice before putting it into a trust.
Why? Because trustees can be held legally and financially responsible for contamination cleanup. If the property requires remediation, the trust may be liable, or worse, the trustee may be sued personally.
If you must include such property in a trust, make sure it has been inspected and cleared for environmental hazards, and that your trustee is fully aware of any risks involved.
8. Business Interests Without a Succession Plan
Family businesses or partnerships are often complex. Placing your business interest into a trust without a clear succession plan can create chaos, legal battles, or loss of control after your death.
Before you transfer shares or LLC interests into a trust, review the company’s operating agreement or bylaws. Some restrict ownership transfers or require approval by other partners.
More importantly, make sure the trust’s terms clarify who will run the business, who inherits voting rights, and what happens if the trustee has no business experience. Otherwise, you may create a management nightmare for your heirs and your surviving partners.
9. Assets That Already Have Beneficiary Designations
Trusts are designed to avoid probate, but many financial assets already skip probate on their own if you name a beneficiary. These include:
Payable-on-death (POD) bank accounts
Transfer-on-death (TOD) brokerage accounts
Annuities
Some pensions and retirement plans
Adding these to a trust doesn’t add much value and can sometimes override or conflict with existing designations, leading to confusion or even litigation after your death. Keep it simple: use the built-in beneficiary designations when they work. Save the trust for assets that don’t otherwise transfer easily.
10. Out-of-State Real Estate (Without Coordination)
Many people own property in more than one state—a vacation home in Florida, a rental unit in Arizona, or a family cabin in Maine. While you can place these in your trust, doing so improperly can trigger multiple probate processes or tax filings in different jurisdictions.
Each state has its own property laws and requirements. If you’re including out-of-state real estate in your trust, it’s crucial to work with an attorney who knows how to navigate the rules in both your home state and the property’s location. Otherwise, what you thought would simplify your estate could result in more red tape for your heirs.
Trusts Are Powerful, But Not Infallible
Trusts can be one of the most powerful tools in estate planning, but like any tool, they’re only effective when used correctly. Putting the wrong assets into your trust can create legal, financial, and emotional problems for the very people you’re trying to protect.
Before you transfer anything into a trust, ask yourself:
Is this asset already set to transfer outside probate?
Will putting it in the trust trigger tax or legal consequences?
Does the trustee have the knowledge to manage it responsibly?
And most importantly, consult with an experienced estate planning attorney. A well-crafted trust strategy is never one-size-fits-all, and what you leave out can be just as important as what you put in.
What’s one asset you’re unsure about including in your trust?
Read More:
How to Build Generational Wealth Without a Trust Fund
7 Times People Lost Everything Because of “Trusted” Financial Advisors
