Property trusts allow you to place your personal residence or any property you own into a trust to be given to a beneficiary, explains a recent article, “When Should I Put My Home in a Trust,” from yahoo!life.com. Placing your home in a property trust makes it far more likely your home will go to its intended beneficiary.
The property trust can be a revocable or irrevocable trust. Which one you use depends on your unique circumstances. If it’s a revocable trust, you can change the terms of the trust up until your death. However, because you maintain control of the asset in a revocable trust, it’s not protected from creditors.
If the main reason you’ve put the house into a trust is to protect it from creditors, a court could reclaim the asset if it were determined the sole reason for the transfer into the trust was to elude creditors.
Generally speaking, people have three basic reasons to place their homes into property trusts—to avoid probate, to keep their transaction private and to keep the transfer simple.
Avoiding probate. People who put their homes in a property trust often do so to avoid having their home going through the probate process. When the owner dies, their estate goes through this court process and any debts or taxes owed on the property are paid. If there is no will giving direction to how the property should be distributed, then it is distributed according to the state’s laws.
If the home is not in a trust and not mentioned in a will, the property will usually go to a spouse or child, although there’s no guarantee this will happen. If there is no spouse and no offspring, the property will go to the next closest living relative, such as a parent, sibling, niece, or nephew. If no living relative can be found, the state inherits the property.
Chances are you don’t want the state getting your family home. Having a will, even if you don’t put your property into a trust, is a better alternative.
The cost and time of probate is another reason why people put their homes in trusts. Probate costs are borne by the estate and thus the beneficiaries. Probate also takes time and while probate is in process, homes need maintenance, taxes need to be paid and costs add up. If the house is sitting empty, it can become a target for thieves and property scammers.
Another benefit of a property trust is to keep the transfer of the home private. If it goes through probate, the transfer of property becomes part of the court record, and anyone will be able to see who inherited the home. When family dynamics are complicated, this can create long-lasting family battles.
A property trust is also far simpler for your executor, especially if the home is in another state. If you have a vacation home in Arizona but live in Michigan, your executor will have to navigate probate in both states.
Speak with an estate planning attorney about whether a property trust is right for you. They will create a property trust and transfer the property into the trust. This is a straightforward process. However, without the guidance of an experienced professional, mistakes can easily be made.
Contact us to review your estate plan with one of our estate planning attorneys.
Reference: yahoo!life.com (Jan. 31, 2023) “When Should I Put My Home in a Trust”
Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys