How To Put My House In A Trust – When you hear the word “trust”, many people think that trusts are only used by the uber rich to protect their millions of dollars, but this is far from the truth. Yes, very wealthy families use trusts to reduce the size of their estates, but there are many good reasons why setting up a trust makes sense for the average individual or family. The two main reasons are to avoid probate and to protect assets from a long-term maintenance program. This article will guide you to:
When you set up a trust, you essentially create a dummy entity that holds your assets. Depending on the type of trust you set up, the trust may have its own Social Security number, called a “tax identification number.” Here is an example. Mark and Sarah Williams, like most married couples, have their primary residence in a joint name. They decided to establish the “Williams Family Trust”. Once the trust is established, they change the name of their home deed from Mark and Sarah to the Williams Family Trust.
How To Put My House In A Trust
Before I get into the benefits of setting up a trust for your home, you first need to understand the difference between a “revocable trust” and an “irrevocable trust.” As the name suggests, a revocable trust can be revoked at any time. In other words, as the owner you can reclaim the property. You never “give it up”. A revocable trust does not have a separate tax identification number. They are based on the owner’s social security number. A revocable trust is sometimes called a “living trust.”
Putting Main Residence Into A Trust
With an irrevocable trust, once you transfer ownership of the home to the trust, it is irrevocable, meaning you can never get it back. The trust owns the home for life. Now this may seem very restrictive, but there are many strategies that real estate attorneys use to mitigate these limitations, and I will discuss some of these strategies later in this article.
In both cases, the owner who gives the property to the trust is referred to as the “grantor” in the trust parlance. I want you to familiarize yourself with this term as it is used in this article.
So why would anyone use a revocable trust instead? The answer is that it depends on what benefits you can get by turning your home into a trust.
In our experience, this is the number one reason people monitor their home. Avoid trust asset probate. If a family member has died and you are the executor of their estate, you know how much of a headache the probate process can be. The cost cannot be estimated.
Earnest Money: What It Is And How Much It Is In Real Estate
Let’s go back to the example of Mark and Sarah Williams. They share a home and want to name their two children as 50/50 beneficiaries of all their assets.
When the first spouse dies there is no problem as the house is jointly owned and its ownership automatically passes to the surviving spouse. However, when a surviving spouse dies, the home is part of the surviving spouse’s estate, subject to the probate process. Because of the testing process, you usually try to avoid testing:
There are costs in the form of attorney fees, accounting fees, executor’s commissions and appraisal fees required to inspect the property. It is being delayed due to court proceedings. To begin the process you must obtain a court-issued probate and the court must approve the final disposition of the estate. It is not unusual for the vetting process to take 6 months or more from start to finish.
If your home is owned by a revocable trust, you skip the entire probate process. After the death of the other spouse, the trust gives the house to the beneficiaries of the trust. You save on probate costs and your beneficiaries get immediate access to the home.
Can I Put My House In A Trust Without A Lawyer?
I’ll stop for a second because usually, “So if I believe, do I need a will?” The answer is yes, you need both. Everything in your trust goes to the trust’s beneficiaries immediately, but any assets not owned by the trust go to your beneficiaries through probate. Trusts can hold real estate, checking accounts, life insurance policies, and other assets. But there are certain assets, such as cars and personal belongings, that are outside of the trust that are usually given to your beneficiaries through a will. But in most cases, only wills and trusts have beneficiaries listed.
For parents with children under the age of 25, revocable trusts are used to prevent the loss of children at a very young age. If you only have a will and both parents pass when your child turns 18 and they inherit a large inheritance between your life insurance, retirement accounts, and home, they may not be making the best financial decisions. What if they decide not to go to college because they inherited a million dollars, but spend all the money in 5 years? As financial planners, we have unfortunately seen this happen. This is ugly.
A revocable trust can impose restrictions to prevent this from happening. The trust should have language that states they will receive 1/3 of their inheritance at age 25, 1/3 at age 30, and 1/3 at age 35. But at the same time, the trustee can allow living expenses, education disbursements. , health expenses etc. The possibilities are endless and these documents can be customized to your personal preferences.
A revocable trust gives the grantor more flexibility because they are not giving away assets. It is still part of your estate, it is not subject to probate. At any time, owners can return property, change trustees, change beneficiaries of the trust, and change the characteristics of the trust.
Frequently Asked Questions
As you can see, the above two are identical revocable trusts. Irrevocable trusts avoid probate and are a way to control the distribution of assets after your death. However, you get two additional benefits that are not associated with revocable trusts. Let’s look at the benefits of long-term care event protection.
When individuals use an irrevocable trust to protect assets against long-term care events, it is sometimes called a “Medicaid trust.” If you’ve ever had the personal experience of a loved one needing any type of long-term care, whether it’s through home health care, assisted living, or a nursing home, you know how expensive that care can be. According to the NYS Department of Health, the average daily cost of a nursing home in the Northeast is $371. That’s $135,360 per year.
For those who need this type of care, they must spend all of their wealth until they reach a very low threshold, and then Medicaid will pick up the tab from there. Now the IRS is smart. They don’t allow you to enter a long-term care program to qualify for Medicaid and then transfer all of your assets to a family member or guardian. Before you qualify for Medicaid, for an individual or a trust, there is a 5-year look-back period that says any assets you’ve gifted in the past 5 years are put back on the table for spending purposes. That’s why they call these trusts Medicaid trusts.
Now, your primary residence is not a Medicaid expendable asset. If your only asset is your home and you’ve exhausted all your assets other than an IRA or qualified retirement plan, you may immediately qualify for Medicaid. So why should the house have unwavering faith? Medicaid cannot force you to sell your primary residence or count it as a low-value asset, and Medicaid will pay your property taxes for your care. That way, when you pass away, your home won’t go to your children or heirs, Medicaid will take over the property and sell it to pay for your care. Not a good result. Many people choose to pass the value of their home to their children rather than Medicaid.
Life. Hope. Faith. Wandering From Wilderness To Promis
If you transfer ownership of the home irrevocably to the trust, you can live in the home for life and it is not a depreciable asset as long as the home remains in the trust for more than 5 years. Medicaid and Medicaid liens cannot do this
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