Should I Put My House in a Living Trust?
According to the real-trust definition, a living trust is a trust or a legal document that a person creates during his/her lifetime. According to this trust, an individual takes responsibility for managing someone’s assets and allowing easy transfer of the settlor’s asset, avoiding expensive and complicated legal procedures.
So, Should I Put My House in a Living Trust?
There are two common reasons people prefer putting home in a trust. First, they want their loved ones to inherit their home easily and not through an expensive and stressful court process. Their home easily transfers to their heirs, shortly after their death, privately.
Secondly, a living trust features planning for incapacity. According to a general misconception, real-estate trust planning only involves death. However, a foolproof estate planning plan also includes incapacity plans. People can name a successor trustee when they create a living trust. The person they choose becomes accountable for distributing their assets to the heirs after the owner of the house dies. Another responsibility is to manage and distribute your assets to your heirs after your death if you did not do it beforehand. When you put your home into a trust, you ensure that someone is there to take care of your house.
How Does it Work?
The person creates a living trust called the grantor or the settlor, depending on the state he/she lives in. The person also assigns himself as the trustee – or the individual who holds the right to manage your assets, property, and money. That way, you still have the right to manage your trust’s assets during your life. For instance, if you intend to put your house into a trust in the future, you can also sell it at any time.
Moreover, you name the beneficiaries in your revocable living trust. These individuals can be your children, spouse, or even grandchildren. Basically, these are the people who will inherit your assets.
The last step is to designate a successor trustee who becomes responsible for your living trust if you become incapacitated or die.
What are the Benefits
Here are some of the benefits to answering the question "Should I Put My House in a Living Trust?"
One of the most significant benefits of putting your house into a trust is that you will avoid probate court. Probate is an expensive and time-consuming process involving considerable costs. The court uses this legal process to guarantee the distribution of your assets as per the law and paying off your debts, at the time of your death.
The process can become more complicated in case you own property in other states. Your family will have to face multiple probates, according to the rules and laws of that sate. In some cases, almost 10% of your estate’s value goes into court costs, inventory fees, and legal fees. This value can be even larger for smaller estates. While such costs vary, some clients end up paying hundreds of dollars. Moreover, the standard probate process can take several months or even years.
Protects your Privacy
Probate is a public matter. Anyone can see the size of your estate because you can’t keep the matter private. If you don’t want others to know about your family debts or get a glimpse of your assets, putting your house into a trust is a wise decision. That way, you will save your assets from fraud and greedy creditors. Moreover, a will is a private document that the heir receives only until the person who wrote it, dies. If this document goes through probate, anyone can get a copy of someone’s will.
In case someone has a medical emergency during his/her life, a living trust protects their family from undergoing a conservatorship, which gives a court-appointed guardian the responsibility of managing an incapacitated individual's finances.
The incapacity protection clause of a living trust is beneficial for families that do not want to go to court to access the incapacitated individual’s finances. In case the trust is an individual trust, the trustee can take over and manage the assets. However, if a married couple owns the trust, then the second spouse usually serves as the acting trustee.
Having a durable power of attorney for finances can grant the new acting trustee the right to manage any finances or property outside of the trust.
Although the pros of putting a house into a trust outweigh the cons, here are a few things you should know about the process.
This process may involve some additional paperwork to make sure you create an effective living trust. Make sure the ownership of your house is transferred to you as the trustee. Moreover, your house has a title and to show that your property now belongs to the trust, you need to change the name of your house. To complete all these phases, you will have to prepare and sign a new deed that legally transfers ownership to you as a trustee.
Additional paperwork and accurate record-keeping will make sure you don’t have to waste time and money in the complicated probate process. Not to mention the stress your family will have to endure when accessing your assets and property after your death.
If you have a living trust and you are both the trustee and the grantor, you don’t need any separate income tax records. The income you get from the property you hold in trust makes their way on your personal tax returns. But, you must keep accurate written records, if you are transferring the property in or out of the trust. While this task isn’t difficult, some people forget about accurate bookkeeping, over time.
The pros of putting a house into a trust are more than its cons. Hence, if you want to avoid a financial mishap and plan on passing your assets to your family without a problem, putting your house into a trust is the best decision you will ever make.
This article is a service of Pantea I. Fozouni, Family Business Lawyer®.
The Palm Desert Law Group excels as a special needs planning lawyer, planning for physicians and healthcare professionals, Wills and Trusts and Business Law. If you are looking for an Estate Planning Attorney Palm Springs, or a Palm Springs Business lawyer, then you have found what you are looking for.
We also are the best Palm Desert Injury Lawyer and Estate Planning Attorney in Palm Desert. We serve all over the Coachella Valley and are here for youWe don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. Go online today to schedule a Family Wealth Planning Session and find out how to get this $750 session at no charge.