Estate planning, while certainly no one’s idea of “fun,” is an essential step that does deliver peace of mind and reassurance. It also provides a sense of control over what happens to your assets, and to your loved ones, after your death. Of these, likely your home is one of the biggest pieces of this puzzle. If you are considering putting your house in a trust, one of your primary questions may be, “Do I still need to take this step if I have a will?” Followed quickly by, “What are the pros and cons of a trust?”
Let’s tackle the first question: do you still need a trust if you have a will? Both legal documents are designed to allow you to detail your wishes regarding your assets. With a will, the asset distribution process proceeds in probate court. This can take months, and even up to a year or longer, to settle, and it will cost your beneficiaries time and money.
A trust is a different type of instrument: it goes into effect while you are alive. If you put your home into a trust, you can appoint yourself as the trustee. This allows you to retain control over the asset and decide how it is used and how you will manage it. You will also appoint a successor trustee. This person steps in to manage your asset (in this case, the house) if you become incapacitated. Upon death, the successor trustee takes over the management of the asset.
Quick note: a revocable trust can be changed at any time. An irrevocable trust cannot be changed without permission from the beneficiary(ies). For most people, a revocable trust is the preferred option.
Now onto the second question: what are the pros and cons of a trust when it comes to your house?
Pros and Cons of a Trust for Your Home
When estate planning, it is important to consider the advantages and disadvantages of different options. Benefits include:
- Sparing your beneficiaries from a long, drawn-out probate process. A trust puts them in a position to handle your affairs and take ownership of the house much more quickly.
- Saving your loved one’s money. Probate administration comes with a relatively high price. Costs can add up to about 3% (or more) of your asset’s value.
- Privacy. Wills are public record. Everyone who cares to can find out to whom you have left assets. This can be quite contentious. The contents of a trust are not made public, which can reduce some of the drama that often occurs when it comes to asset distribution.
- Allowing your beneficiaries to move on – and move in – more quickly. They will be able to take ownership immediately and either live in or sell the house as they see fit. With a will, they’d be looking at months or longer. A faster process can allow them to move forward.
Weigh potential drawbacks as well:
- The process of creating a trust is more involved than creating a will. There is more paperwork, and even more if you have a number of properties to distribute.
- You have to retitle the assets in the name of your trust. If you do not, your beneficiary may not receive the house upon your death.
- Depending on the type of trust you choose, you may cede ownership of the house. This can be problematic when it comes to your homeowner’s and title insurance.
There are significant benefits of putting your house in a trust. With an expert team behind you, you can counter the potential disadvantages to ensure your assets will be distributed according to your wishes. Contact our West Palm Beach trust administration attorneys to learn more and to start your estate planning.