Life is short. And while no one wants to focus on the end, forcing
yourself to do so can ultimately makes things a bit easier for your
loved ones—not just emotionally, but financially too. One way to
deal with the latter concern is to put your home in a living trust.
A living trust is a legal document that places your assets into a
trust for your benefit (you’re the trustee) while you’re alive and
then transfers those assets, via your “successor trustee,” to
beneficiaries after you die or become disabled.
How is a living trust different from a will?
Like a living trust, a will is a legal document that instructs how to
distribute your possessions after your death. If you have a will
when you pass away, your estate goes into “probate.” Probate
court proceedings (during which a deceased person's assets are
transferred to the people who inherit them) can be long, costly,
and confusing. It's no wonder so many people take steps to spare
their families the hassle.
The court appoints somebody (usually your executor) to collect
information about your assets and liabilities, pay your bills, then
distribute the remainder of the estate to your beneficiaries
according to your wishes. Probate includes a lot of paperwork
and can take up to a year. However, if you set up a living trust
while you’re alive, you avoid court supervision of the most
valuable items you own after you're gone.
Whatever you’ve placed in the trust can be distributed in a matter
of weeks after your demise, not months. And as a bonus, a living
trust is private, whereas a will is a public document, so everyone
knows what and how much you did (or didn't) leave to your least
favorite relatives.
So, should you put your home in a living trust?
Yes. There’s no point in having a living trust unless you fund it
with your assets, and your home typically is your largest asset.
If you own vacation homes in different states, it’s especially
important to put those in the trust, too, to avoid separate probate
proceedings in those states.
You still need a will to designate who gets the antique clock or
your coveted spoon collection. But you should make sure all
your big-ticket items—specifically any property you own
— are covered by a trust.
To place a property in a living trust, you would have a deed drawn
up in the name of the trust. If you have a mortgage, notify your
lender that you’re putting the property in a living trust to avoid
confusion later. It’s also a good idea to keep a list of what’s in
the trust, which will make life easier for your successor trustee.
Revocable vs. irrevocable trust: Which is right?
As the creator of the trust, you will also have to choose between
having a revocable or an irrevocable trust. A revocable trust is
just what it sounds like—you can change what property is in
your trust, or even the very existence of the trust itself. It works
best for "a client who wants to maintain control over his or her
assets, right up until the moment he or she can no longer mentally
do so, at which point a designated trustee is ready to step in,"
according to Life Health Pro.
An irrevocable trust, by contrast, is one where once you create
it, you can't take things in or out, or dissolve it. As such, this
trust is not included in your estate's value, on which you'll pay
taxes—so an irrevocable trust can save you some money come
tax time. Still, due to this lack of flexibility, in most instances,
the irrevocable trust makes more long-term financial sense. A
discussion with a representative in our office can clear up which
kind of trust is best for you.
Think of it as a bucket filled with your money, property, and
other assets. You're free to do whatever you want with the
contents of the bucket, such as sell stock or property. But
after you’re gone, whatever's left in the bucket goes to your heirs.
Estate planning goes to the bottom of everybody’s to-do list.
Typically, only about 20% of Americans have a living trust. But
once you sign a living trust, the weight of the world is off your
shoulders.
Save your family time, money, and hassle. Give us a call today, to
discuss setting up your Living Trust.
