Can You Put Cash Into a Living Trust?

You can put cash in a living trust, but there are drawbacks.

A living trust is a legal relationship between a trust creator, a trustee and one or more beneficiaries. Living trusts allow you to own property in a way that reduces taxes and avoids probate. It is not illegal to put cash into a living trust. However, it makes sense to put the cash into a bank account owned by the trustee.

Identification

A living trust can include almost any type of property, including cash. As long as the trust document identifies the cash and the cash is given to the trustee, it becomes part of the trust property.

Warning

There is no paper trail with cash in a living trust, so if the cash disappears there is no way to convict the trustee. This leaves the cash vulnerable to theft or other loss.

Trustees

Some trustees will decline appointment if cash is part of the trust property, primarily because it is so difficult for the trustee to prove they did nothing wrong if there is ever a question over the amount of cash in the trust. In other words, it may be difficult to appoint a trustee who is willing to deal with cash.

Interest

Most trusts are established so that the trust income is disbursed, which allows the trust to continue forever because there is always principal to invest. However, cash is quickly depleted because it doesn't earn any interest.

Protection

If you put cash in your trust, you should also create a mechanism to identify the bills you give to the trustee. Purchase a safe for the trustee to keep the cash in or open a safe deposit box at the bank.

References

• "Nolo's Estate Planning Basics"; Denis Clifford; 2009
• Nolo: Living Trusts and Avoiding Probate