For homeowners, the family home is often the most cherished and valuable asset. Prudent planning ensures its smooth transfer to heirs upon passing or during incapacity. Part 1 covered revocable and irrevocable trusts, including home title transfer. In Part 2, we’ll explore trust benefits versus other estate planning methods.
In estate planning, both wills and trusts are commonly used vehicles for bequeathing wealth and assets to loved ones. However, placing your family home in a trust offers several distinctive benefits compared to relying solely on a will.
Utilizing a trust to pass on your home offers a significant advantage – avoiding probate court proceedings.
In contrast to will-designated assets, trust-held assets evade probate, sparing your loved ones from prolonged, costly and emotionally taxing legal processes. Probate timelines vary widely, spanning months or years, and can expose your family’s affairs to public scrutiny.
Trust-funded assets sidestep probate entirely, ensuring prompt property transfer and maintenance. Trusts also uphold privacy, as the property transfer occurs confidentially in an attorney’s office, shielding your family’s affairs from public exposure.
Protection against incapacity
Placing your home in a trust not only eases posthumous transfer but also shields it during severe illness or injury, unlike a will. A will solely activates after your passing, offering no protection during incapacity.
Incapacity with only a will prompts costly court petitions for a conservator or guardian, adding stress and potential conflicts. Court-appointed guardians may not align with your preferences.
With a trust, you can name a successor trustee in its terms, not the court, granting them authority to manage or sell your home in case of incapacity. For instance, they can sell it for long-term care costs if needed.
Control over asset distribution
Trusts provide enhanced control over the distribution of assets compared to wills. You can include specific instructions in the trust’s terms for how and when assets held within the trust are distributed to beneficiaries. This can involve stipulations such as releasing assets only upon specific life events like college graduation, marriage or reaching a predetermined age.
Such control curbs the risk of beneficiaries depleting their inheritance hastily and offers incentives for responsible behavior. Furthermore, assets help in trust remain shielded from beneficiaries’ creditors, lawsuits and divorce, which will do not provide.
Avoiding family conflict
When a will designated multiple property beneficiaries, disputes can arise over property decisions, straining family relationships.
Placing your home in a living trust can prevent such conflicts. With multiple beneficiaries, a neutral third-party successor trustee in the trust can make definitive decisions, ensuring fair distribution and averting disputes, like letting one child live in the home while compensating others elsewhere.
Transfer on death deed
Certain states permit the use of Transfer on Death (TOD) deeds for the transfer of property ownership to heirs without undergoing probate. Initially conceived as a cost-effective alternative to living trusts, a TOD deed enables specified beneficiaries to assume property ownership without probate or trust administration. However, TOD deeds come with significant drawbacks that can lead to unintended issues for your heirs.
Relying on TOD deeds as trust alternatives is rarely recommended.
Finding the right solution for your family
While placing your home in a living trust can be an optimal means of transferring it to your loved ones, every family’s circumstances differ. To ascertain whether your estate plan should incorporate a will, a trust or a combination of both, consult with an attorney.
This article is provided by your local estate planning attorney, Corina Colan.
The Law Office of Corina I. Colan / (909) 265-3315 / [email protected] / www.colanlegal.com