What Assets Should Not Be in a Trust in Georgia?

Retirement Accounts Trigger a Tax Bill the Day You Move Them

An IRA, a 401(k), and a 403(b) all stay outside your revocable living trust. Moving one in is not a paperwork step. It is a withdrawal, and the money lands on your tax return that year.

The reason sits in federal law. Under 26 U.S.C. § 408(a), an IRA is held for the exclusive benefit of one individual. A trust is not an individual. So the money has to leave the IRA before it can reach a trust. And 26 U.S.C. § 408(d)(1) treats any amount paid out of an IRA as income to whoever receives it.

A workplace plan is locked down even tighter. Under 26 U.S.C. § 401(a)(13)(A), a 401(k) or 403(b) must say in its own rules that benefits “may not be assigned or alienated.” You cannot sign the account over to a trust at all. The plan is not allowed to let you.

None of this leaves the account exposed. A retirement account already skips probate on its own. It goes to the person named on the beneficiary form. That form outranks both your will and your trust.

So the real work is keeping the form current. A stale beneficiary form is the true danger here, not a missing trust. An ex-spouse named in 1998 still gets the money in 2026 if nobody changed the form.

Some families do want a trust to receive a retirement account. That is a real option, but it is a drafting job, not a retitling job. You leave the account in your own name and name the trust on the beneficiary line. Under the SECURE Act, most beneficiaries who are not your spouse must empty an inherited account within 10 years of your death. A trust that is not written for that rule can make the tax bill worse, not better.

Health Savings Accounts Must Stay in One Person’s Name

A health savings account cannot be owned by a trust. Federal law is specific about who holds it. Under 26 U.S.C. § 223(d)(1), an HSA exists “exclusively for the purpose of paying the qualified medical expenses of the account beneficiary.”

Section 223(d)(3) then defines that person. It is the one individual the account was opened for. A trust cannot fill that spot. A medical savings account works the same way.

The HSA beneficiary line is the tool to use instead. What you write on that line matters more than most people expect.

Name your spouse and the account simply becomes their HSA. Nothing is taxed. That rule is 26 U.S.C. § 223(f)(8)(A).

Name anyone else and the result flips. Under § 223(f)(8)(B), the account stops being an HSA on the day you die. Its full value then becomes taxable income to the person who receives it.

That is a big swing for one line on one form. It is also the kind of gap a trust package review is built to catch.

A Child’s Custodial Account Is Not Yours to Move

A UTMA or UGMA account holds money for a child. Your name may sit on the statement as custodian. The money is already the child’s.

Georgia says this outright. O.C.G.A. § 44-5-121 states that the transfer “is irrevocable, and the custodial property is indefeasibly vested in the minor.” You cannot take it back. You cannot move it into your own trust. It is not your asset to retitle.

The custodian job also ends on its own. The child reaches the age the account sets. The money is handed over outright. No one controls how they spend it after that.

Plenty of parents dislike that ending. The fix is not to touch the custodial account. Fund a separate trust with your own money and let the trust hold what you want controlled. That is one of the clearest reasons to know which assets do belong in a trust before you start moving anything.

S Corporation Stock Needs a Trust Written for It

This one is not a flat no, and most articles get it wrong. Your revocable living trust can hold S corporation stock while you are alive. Under 26 U.S.C. § 1361(c)(2)(A)(i), a trust may be an S corporation shareholder when one individual is treated as its owner. A normal revocable living trust fits that description.

The trap opens at your death. Under § 1361(c)(2)(A)(ii), that same trust stays an allowed shareholder for only two years after the owner dies. Past two years, the trust no longer qualifies. The one exception is a trust drafted to hold the shares a different way.

Losing the S election is expensive. The company gets taxed as a C corporation instead. Families usually find out long after the deadline passed.

So the real rule is narrower than “keep it out.” It is do not move business stock without reading the trust language first. A trust built for the job can hold those shares well past the two year mark.

The same caution applies to an LLC interest. The operating agreement may require the other members to approve a transfer, even a transfer to your own trust.

Vehicles Cause More Paperwork in Georgia Than They Save

Georgia has no transfer on death form for a vehicle title. O.C.G.A. § 40-3-34 covers how a car title moves. Nothing in it creates a beneficiary designation for a vehicle.

You can still put a car in your trust. Most Georgians should not. Retitling means a new title application. It also means telling your insurer that a trust now owns the car.

Some carriers handle that in one phone call. Some do not. An insurance gap on the car you drive daily is a real risk for a very small gain.

Georgia already offers a simpler path at death. Under § 40-3-34, a family can move a title with a certified copy of the will. Letters from the probate court work too.

When neither one exists, the Georgia Department of Revenue accepts Form T-20, an Affidavit of Inheritance. It goes in with a certified death certificate and the title application.

A rare car or a collection is the exception. The value there is high enough to justify the extra steps.

Life Insurance You Own Already Skips Probate

A life insurance policy pays the person named on it. Georgia law is blunt about that. O.C.G.A. § 33-25-11(a) sends the money “exclusively to the benefit of the person” named in the policy.

The payout never touches probate when a living person is named.

Handing the policy to your living trust does nothing for your taxes. The trust is still treated as you. So the death benefit still counts in your estate. You gain paperwork and no shield.

One change is worth making today. Never name your estate as the beneficiary. The same law says money paid to an estate becomes “part of the insured’s estate for all purposes.” Those words pull the cash into probate. They also put it in reach of your creditors.

Naming your trust as beneficiary is a separate call. It is not the same as the trust owning the policy. It fits when the heir is a minor. It also fits when the heir cannot handle a large sum at once.

An irrevocable life insurance trust is a different tool with different rules. A revocable living trust does not do that job.

Social Security and Other Payments You Cannot Sign Over

A Social Security benefit cannot go into a trust. Federal law says the right to a future payment “shall not be transferable or assignable, at law or in equity.” That is 42 U.S.C. § 407(a).

The benefit belongs to the person who earned it. It ends at their death.

Pensions and annuities often work the same way. Each one runs on its own contract. Each one has its own beneficiary form.

The safe habit is simple. Read the beneficiary form for every income stream you own. Do not assume the trust covers it.

The One Asset People Wrongly Leave Out — A House With a Mortgage

Many Georgia homeowners keep the house out of the trust because they fear the mortgage. The worry is always the same. The lender spots the transfer, calls the due on sale clause, and demands the full balance at once.

Federal law blocks that. 12 U.S.C. § 1701j-3(d)(8) bars a lender from using a due on sale clause for “a transfer into an inter vivos trust in which the borrower is and remains a beneficiary.” The trust also cannot change who has the right to live in the home.

A revocable living trust you created, for a home you still live in, is exactly that. The protection covers homes with fewer than five units. That is nearly every house in Georgia.

So the mortgaged house usually belongs inside the trust. Georgia adds one step that people miss. Under O.C.G.A. § 53-12-25(b), the deed has to be recorded when the person transferring the property is also the trustee. That is the normal setup for a Georgia homeowner.

One genuine risk does come with the move. It is not the lender. Once the deed is recorded, call your homeowner’s insurance carrier and add the trust to the policy. If the trust owns the house and the policy names only you, the carrier has grounds to deny a claim.

The full deed and account sequence is its own project. Funding a trust in Georgia walks through the order those steps go in.

What Happens When You Leave the Wrong Thing Out by Accident

Some assets stay outside a trust on purpose. A different problem shows up far more often. An asset gets left out by mistake, and nobody notices until someone dies.

A trust only controls what was legally moved into it. O.C.G.A. § 53-12-25(a) says it plainly: “Transfer of property in trust shall require a transfer of legal title to the trustee.”

A house you meant to deed over, but never did, is still in your own name. At death it goes to probate as though the trust did not exist.

Probate is not a formality in Georgia:

• Cost. A simple estate runs about $14,700 in attorney and court costs.
• Time. A simple estate takes about 13 months. A business or complex estate averages 25 months.
• Control. Your family cannot sell the house, refinance it, or move the money until the court gives them authority.

That is the gap between an asset you left out on purpose and one you simply forgot. The first is a plan. The second is a bill.

This is also the most common finding when an adult child reads through a parent’s old trust. The document looks fine. The funding never happened.

What to Do Instead, Asset by Asset

Every asset that stays outside the trust still needs a home. Here is where each one goes.

Two of these deserve a fresh look every few years. A beneficiary form written before a divorce, a birth, or a death is the most common broken piece in an otherwise good plan.

Cost is the other question people ask. What a revocable trust costs in Georgia is a flat fee. So is a review of one you already have.

A trust package review at The Hive Law is $1,050, flat fee. Melissa Breyer reads your trust, your pour over will, your power of attorney, and your healthcare directive. Then she tells you which assets are truly inside the trust and which ones sit outside it by accident.

Your first call is free, about 15 minutes, and happens by phone with Shawn. If you move forward, your next step is the Design Meeting with Melissa, which is credited toward your plan.

Every question in this area starts from one place. Estate planning in Georgia is a series of ownership choices, one asset at a time.