Buying a home is a great investment in your future and a financial milestone for many. Still, the question arises, is it better to own the home in your name or in a trust? At Clear Counsel Law Group, we often receive calls from new homeowners curious about this very topic. Understanding the implications of this decision makes for more effective estate planning.
Why Consider a Trust for Your Home?
When you own a home in your name and pass away, the property remains in your name until a court decides its fate. This decision comes through a court order during the probate process, which can be time-consuming, expensive, and potentially problematic. Placing your property in a trust can circumvent these issues.
Probate is the legal process where a court proves who is entitled to a deceased person’s assets. It can be costly and complex, requiring legal representation, the appointment of a personal representative, and public announcements to allow for competing claims. By owning your home in a trust, you can bypass this probate process entirely.
The Function of a Trust
Think of a trust as a box where you can store your assets. Anything in this ‘box’ does not need to go through probate when you pass away. This is particularly beneficial for real property, like your home.
There are various ways to own property. For instance, if the property is a rental, owning it through a Limited Liability Company (LLC) might be preferable. The right choice depends on your specific situation and objectives.
It isn’t all upsides from a trust, though. Running a trust requires some up-front costs to create the trust and to manage it when changes are made and assets are added or removed.
Owning a home in your name can lead to simpler transitions in cases of divorce, remarriage or new descendants. Under state intestacy and community property laws, an asset such as a home transfers all or in part to a surviving spouse or children, even if there is a problem with a will. The language of a trust can bar a new spouse from gaining access to the home after your death if specific language is not included.
Expenses in the Probate Process
The probate process can become expensive because it involves legal procedures to validate claims to an estate. The court essentially challenges claimants to prove their entitlement to the deceased’s property. This process involves probate attorneys, personal representatives, public announcements, and adhering to specific time frames, all contributing to the cost.
Trusts are not just for real estate; they can be beneficial for other types of property too. For example, if you have a bank account, placing it in a trust can also avoid the need for probate of the account upon your death. Without a trust, your heirs would need a court order to access the funds, which can take time and numerous filings.
Make an Informed Decision
Deciding whether to put your home in a trust depends on what you want to achieve with your property. It’s a personal decision that requires careful consideration of your goals and circumstances. Consulting with an estate planning attorney can help clarify your options and ensure you make the best choice for your situation.
Owning your home in a trust can provide significant advantages, especially in avoiding the monetary and time costs of probate. It’s a decision that requires thoughtful consideration and, often, professional guidance. At Clear Counsel Law Group, we are equipped to give you information about the risks and rewards of these decisions. Ensure your estate planning aligns with your personal objectives and gain peace of mind for the future by asking us questions about trusts, real estate, or estate planning in general.