Many homeowners want to create estate plans that allow them to protect their homes and more easily pass them on to their children or inheritors after they die. Because of this, estate planning attorneys often counsel homeowners to create a revocable living trust. Through the trust, the homeowners can transfer title of their real estate into the trust’s name to obtain various benefits. However, using a revocable living trusts to own and transfer property does take some additional work, and these trusts are not suitable for all purposes.
Living Trusts and Your Home
To create a living trust you have to write a document that details a relationship between you, the person you appoint as a trustee, the person or persons you name as a beneficiary, and the property you transfer into the trust name. Most people who create a revocable living trust serve as the trustee themselves, and also name themselves as the beneficiary. Because of this, the property transferred into the trust will never be out of your control.
However, it’s important to realize that the trust will act as a separate legal entity. Even though you control the property, because you are the trustee and the beneficiary, you still have to act as if the trust is the actual owner. This requires careful attention to detail when transferring property into the trust’s name, a process called funding, as well as when transferring it back out.
Real Estate Transactions
If you own property through a living trust you can still buy new property or sell trust property as you choose, even though there are some additional requirements involved. For example, if you own your home through your living trust you can sell the home as you like. When you choose to sell, however, you’ll have to transfer title of the home from the living trust. This might seem inconsequential, but it is a legal requirement.
For example, if you are selling the home as an individual, you would sign any documents related to the sale as an individual. However, if the trust owns the home and you are the trustee, you will have to sign those documents as the trustee.
Your Home and Asset Protection
One of the more important issues to consider when creating a revocable living trust is its lack of asset protection benefits. If protecting your home from your creditors or lawsuits is important to you, you’ll have to develop tools apart from the living trust.
What kind of tools? These will differ depending on your circumstances, but could involve forms of an irrevocable trust. For more information, you should work with an experienced and qualified estate planning attorney.
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