Putting Your Home In A Trust
A person in a yellow sweater writes in a journal.If you're thinking about creating your estate plan - and you should! - you've probably wondered how best to leave your assets, and how. Your assets have monetary value, of course, but some items, like your family home, probably have sentimental value, as well. One of the most important parts of the estate planning process is planning what will happen to your home, but most people aren't sure what is the best way for their specific situation. While most are familiar with Wills and how they work in general, some might be unaware of their options when it comes to the distribution of assets like a home. A growing number of homeowners are using trusts.
So, what is a trust?
A trust is a financial arrangement by which a person places their assets in the care of a third party. In estate planning, trusts can be useful for parents of underage children, where parents might set up a trust for their child's legal guardian to care for the child financially if something were to happen to the parents. Trust require, well, trust.
A trust created for assets such as your home or real estate to pass on to family members or beneficiaries has a few options. The basic categories for trusts of this type are living trusts and testamentary trusts. Living trusts take effect while you are still living, whereas testamentary trusts go into effect upon your passing. Testamentary trusts are generally stipulated in Wills and created when the Will goes into effect. This means that, like Wills, testamentary trusts can be revoked or changed at any time. Living trusts can be either revocable or not, but irrevocable trusts, as you might guess from the name, cannot be changed, altered, or revoked after they are created. Revocable trusts become irrevocable after the creator of the trust passes on.
When you're creating a trust, you will need to transfer the deed of your home or real estate into the trust's name so that the trustees can assume ownership when it's time. If this sounds complicated, it's because estate planning and trusts are complex and are best done with the help and advice of a qualified attorney.
The Pros and Cons
Trusts and the different types of trusts have benefits and drawbacks. A major benefit of a living trust is that you can usually avoid the probate process, at least in the case of revocable living trusts. Because testamentary trusts are created after death, they must go through probate, which can be a lengthy and expensive process.
A trust may also defer some estate taxes, if your estate is subject to them.
Trusts can also delay the distribution of your estate if you choose, or place stipulations for beneficiaries to qualify for inheritance. Reason you might want stipulations is if you have minor children and want them to wait to receive their inheritance until they are of age, or if you worry that a beneficiary isn't responsible enough to manage the inheritance. A trust lets you set conditions that must be met before the property or assets are disbursed.
One disadvantage of a trust is that they can be complicated to create, especially if it is more than just your home that you want to place in trust. Buying and selling assets can mean that your trust has to be updated frequently and titles have to be updated to reflect your estate and the ownership of the asset by the trust, not the individual. Trusts also do not protect your beneficiaries against any liens that might be on your assets automatically. Several factors are involved, including the time of trust, so if you pass away with taxes or judgments owed against your property, creditors may look to collect those debts from your estate, just as they would in probate.
Making an estate plan is critical for just about everyone, and crucial for parents. Knowing what will happen to the care of your children, your home, your assets, and even your health care decisions if you should become unable to make decisions for yourself is probably the most important legal decisions anyone has to make... and everyone will need to make them. Failing to make an estate plan puts the burden on family to sort out your affairs and assets, and lets probate court make decisions about how your assets are dispensed, making a difficult time even harder and possibly more expensive. Give yourself and your family the peace of mind of knowing that you've made all your own decisions and your estate is taken care of by becoming a member of our legal subscription plans today. Getting your Will and other estate planning documents is free to all subscribers and you can make as many changes as you like as long as you're a member. Learn more about estate planning or sign up today!
