On behalf of Sayer Regan & Thayer of Sayer Regan & Thayer, LLP posted on Wednesday, November 25, 2020.
Many higher end homes are bought and sold in and out of trusts. You may be wondering if placing your own home in a trust is something that you should do too, or if this is something only for the wealthy. A lawyer skilled in trust, probate and estate administration can help you with your unique situation and advise you on the right course of action for your circumstance.
First of all, what will a living trust NOT do? A revocable living trust does not protect your home from creditors, so in the event you are sued and lose, your home will be at risk.
Next, what is a living trust? This is a legal document you and your spouse create during your life to hold title your home and other assets. Just like a will, a living trust details what you wish to have happen with your assets, but unlike a will that doesn’t go into effect until you die, a living trust becomes effective when it is signed and the property has been properly retitled.
Essentially, a living will bypasses the time and cost of probate because your successor trustee (whom you will name) is responsible for managing and distributing your property following your instructions. This will happen at the time you become incapacitated or at the time of your death.
Advantages of a Living Trust
With a living trust, you can:
- Avoid probate costs and delays: When the trustor passes on, the assets are then transferred by the successor trustee promptly and with minimal expense to beneficiaries. The costs associated with probate may not be that high in a simple estate, but the effort and time that are involved with the process while the family is grieving can be avoided.
- Avoid possible conservatorship: If the trustor becomes incompetent, the alternate trustee can take over management of the trust assets sans court costs and delays that come with appointing a conservator.
- Make Changes Easily: The living trust terms may be changed or revoked until such time that the trustor dies. Then, it becomes irrevocable. This will prevent a surviving spouse from disinheriting a beneficiary who has been named in the living trust, such as a child from the first marriage of the deceased spouse.
- Enjoy No Effect on Real Estate Taxes: The transferring of assets into a living trust does not impact real estate taxes.
Inconveniences
There aren’t really disadvantages to living trusts…more likeinconveniences. With such a trust:
- It must be prepared properly. Your attorney must prepare a living trust, whereby you appoint yourself as the initial trustee and beneficiary. Spouses may do this jointly. You should name an alternate or successor trustee. Your signature must be witnessed or notarized.
- There is a lot of paperwork involved. Your assets and major personal property, such as mutual funds, stocks and bank accounts must be titled into the living trust. There’s no use in creating a living trust if you aren’t going to follow through by transferring your assets into the trust. If you neglect to transfer a major asset, it will remain subject to the terms of the probated will.
- Refinancing is a challenge. When you want to refinance a mortgage, some lenders will still require the property title be taken from the living trust so that the new mortgage can be recorded prior to placing title back in the living trust. But savvy mortgage lenders realize that the trustor, beneficiary and trustee are the same person able to bind the living trust assets.
Contact Sayer Regan & Thayer for Trust Management and Administration
To learn more about putting your home in a trust, contact us today for your free initial consultation.
These materials have been prepared by SRT for informational purposes only and are not intended and should not be construed as legal advice.