The goal of effective estate planning is to allow you to transfer your property – including your money, your home, and other assets, to your family, or those beneficiaries that you designate in the most efficient way possible. Two very common estate planning documents are a last will and a revocable living trust. Each of these tools allows you, as a homeowner, to specify who you would like to be the beneficiary of your assets, including your home after you pass.
While a will is certainly an essential estate planning tool, increasingly, many homeowners are considering and utilizing the option of a trust, specifically when it comes to who they would like to inherit their home after they pass. In essence, a trust is a legal creation in which the creator can place money, possessions, property, and other assets that the creator wishes to be given to particular beneficiaries. Some people have the misconception that a trust is only for the wealthy, but this is simply not the case. In fact, many people, wealthy or not, are using trusts to ensure that they have greater control over who will receive their property, and have found significant advantages to doing so.
Some advantages of placing your home in trust include:
- Avoiding probate: Many living trusts are specifically structured to avoid the costs of the probate process. Probate is essentially the formal legal process of recognizing a will and carrying out the wishes expressed in that will. Each state has its own probate procedures, but in many cases, the process can be somewhat costly and time-consuming. Sometimes, particularly if a will is contested, it may take months, or even years for matters to be resolved. A living trust allows property placed in the trust to avoid probate court. This means that the beneficiaries can receive the assets and property within a much shorter amount of time.
- Greater privacy: One important thing to realize about the probate process is that it is a public process, as is the case with the majority of legal proceedings that occur in a courtroom. As a result, the value of your estate and who received your assets becomes public information. Many homeowners would rather avoid this, and putting the home into a trust allows greater privacy.
- Planning for unexpected incapacity: It is commonly assumed that estate planning only centers on what happens when someone dies – but it can also be helpful if the creator of the trust suddenly becomes incapacitated. The creator of a living trust can name a successor trustee who will take over the management of the trust in the event of either death or incapacity. Creating a trust of this nature can provide you with the peace of mind that if you become unable to communicate or act on your own behalf, your home and other assets will be managed in accordance with your wishes by someone you trust.
- Tax benefits: Depending upon your particular financial circumstances, placing your home in an irrevocable trust may allow you the option to avoid or significantly minimize estate taxes. In some cases, it may also help you to qualify for Medicaid or other benefits, depending upon the size of your taxable estate. In addition, it can protect your home and other assets placed in the trust from being seized by creditors.
Without question, any legal procedure can be complex – and the estate planning process is no different. Certainly, there are many financial and estate-planning benefits to placing your home in a trust that are worth considering. Talking with a knowledgeable and experienced attorney or financial planner will help you to take a closer look at how creating a trust might be advantageous for your particular circumstances.
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