What are the disadvantages of putting your house in a trust?
Possible disadvantages Even modest bank or investment accounts that are named in a valid trust must go through the probate process.. After you die, your estate may come at a higher cost as the trust has to file tax returns and value assets, potentially nullifying the cost savings of avoiding estate contracts. As mentioned, one of the biggest benefits of joining a house in a trust is that you can avoid probate court with a live trust as opposed to a will. There are three main reasons why this is important..
The standard probate procedure takes at least 5 months.. However, over the past decade, we’ve found that it typically takes 9 months to a year to resolve simple cases (and several years for disputed cases).. We once represented a client whose estate lasted 8 years.. Moving your home or other assets to a trust (especially an irrevocable trust) can reduce your taxable estate.
For wealthy assets that could otherwise be subject to state or federal inheritance tax, entering assets into a trust can help avoid or minimize estate taxes.. Inheritance taxes generally only apply to properties worth millions of dollars.. Setting up a living trust is not difficult or expensive, but it does require some formalities.. The first step is to create and print a fiduciary document that you should sign in front of a notary..
It’s no harder than making a will.. In most states, transfers of real estate to revocable living trusts are exempt from the transfer taxes that are normally levied on property transfers.. However, in some states, transferring real estate to your living trust can trigger a tax.. See Real Estate when Transferring Titled Ownership to the Trust.
The main benefit of trusting your home is that it bypasses the estate when you die.. All your other assets, whether you have a will or not, go through the probate process. If your home is in possession of a revocable trust, skip the entire estate process. After the death of the second spouse, the house is transferred from the name of the trust to the name of the trust beneficiaries.
You save on discount costs and your beneficiaries have immediate access to the house. A trust will save your loved ones from probate proceedings when you die. It is true that many of the large banks and other financial institutions charge significant fees to set up a trust while charging a percentage of trust assets in annual management fees along with basis point fees for the underlying trust’s cash investments.. For example, someone can challenge a will to gain full or partial ownership of valuable assets such as a house, investment, or a patent you owned.
Unlike a will, trusts can also include instructions on how or when your beneficiaries will receive the assets.. To make your living trust effective, you need to ensure that ownership of your home is legally transferred to you as a trustee.. We would be happy to answer your questions about whether a living trust is the right estate planning option for you.. Putting your wishes down on paper will help you avoid unnecessary problems, and you can be reassured that owning a life in law will end.
Revocable trusts are used for parents with children under the age of 25 to prevent the children from gaining their full inheritance at a very young age.. It is common and advisable to have at least one director who is a trust expert to give substance and credibility to the PTC and ensure that the PTC — and the trusts it manages — are properly executed.. Why would someone use an irrevocable trust instead of a revocable trust? The answer is, it depends on what benefits you want to access by placing your home in a trust.. In many jurisdictions, PTCs are explicitly exempt from the obligation to license and regulate, as long as the PTC acts solely as a trustee of a particular trust or trust group and the public does not acquire fiduciary business or make fiduciary business available to them provides..
When you create a living trust, you will be referred to as a settlor or a grantor, depending on which state you live in.. If the trust only holds your home, you also have other assets that need to go through the estate process, so you can’t really bypass the estate entirely. Instead of handing out a bill to your loved ones for legal fees to control the probate process, pay a lawyer upfront to draw up the fiduciary document. In the unlikely event that you can’t convince an uncooperative lender to deal with you in your capacity as a trustee, you’ll need to find another lender (which shouldn’t be difficult) or transfer the property out of the trust and back into your name.