A Trust Only Works if it is Properly Funded

January 9, 2025

A revocable trust is a powerful estate planning tool that helps individuals manage their assets during their lifetime and distribute them efficiently after their death. However, a trust only works if it is properly funded. The American College of Trust and Estate Counsel explains that many individuals make the mistake of setting up a trust but fail to transfer assets into it. This leaves their estates vulnerable to probate, taxes and disputes. To fully benefit from your trust, you must ensure that it is appropriately funded with all intended assets.

What It Mean to Fund a Trust

Funding a trust involves transferring ownership of assets from your name into the trust’s name. This step gives the trust legal control over the assets, allowing them to be managed and distributed according to the terms of the trust. Without this transfer, your assets may remain subject to probate, and your trust could become an ineffective document.

Key asset types that can and should be transferred into a trust include:

Real estate properties
Bank and investment accounts
Tangible personal property, such as valuable jewelry, artwork, or collectibles
Business interests and intellectual property
Life insurance policies (with the trust named as the beneficiary)

By funding your trust, you ensure that these assets are managed seamlessly during your lifetime and distributed efficiently upon your death.

Why Trust Funding is Essential

Failing to fund a trust undermines its primary purpose. If assets remain outside of the trust, they may become subject to probate—the often lengthy and costly legal process of settling an estate. This can delay the distribution of assets to your heirs and increase the likelihood of disputes among family members.

A funded trust also provides benefits that unfunded trusts cannot, including:

Privacy: Unlike wills, which become public records through probate, trusts keep the details of your estate private.
Control: Funding the trust ensures assets are distributed according to your wishes without interference from courts or state laws.
Continuity: In the event of incapacity, the trust enables a successor trustee to manage your assets without court intervention.

How to Fund a Trust

Properly funding a trust requires transferring ownership of assets into the trust and ensuring that documentation is updated to reflect the change. Each asset type requires specific steps:

Real Estate

To transfer real estate, you must execute a deed transferring ownership to the trust. This often involves recording the new deed with the local land records office. Consult an estate lawyer to ensure that the transfer complies with state laws and doesn’t inadvertently trigger taxes or other issues.

Bank and Investment Accounts

Banks and financial institutions typically require documentation to retitle accounts in the name of the trust. This might involve filling out specific forms or providing a copy of the trust agreement. Failing to update account ownership could result in these assets being excluded from the trust’s control.

Tangible Personal Property

A written assignment can transfer tangible personal property to the trust, such as art, heirlooms and jewelry. The assignment lists the items being transferred and formally declares their inclusion in the trust.

Life Insurance and Retirement Accounts

While retirement accounts, like IRAs and 401(k)s, are not typically retitled to a trust for tax reasons, you can name the trust as a beneficiary. For life insurance policies, updating the beneficiary designation to the trust ensures that proceeds are directed according to the trust’s terms.

Business Interests

If you own a business, transferring shares or interests into the trust allows the trustee to manage them as needed. This requires amending operating agreements, stock certificates, or partnership documents to reflect the transfer.

Common Pitfalls to Avoid

Even with good intentions, individuals often make mistakes when funding their trusts. Common errors include:

Leaving assets out of the trust: Forgetting to transfer all intended assets undermines the trust’s effectiveness.
Failing to update beneficiary designations: Beneficiary forms conflicting with trust terms can create legal disputes.
Not reviewing the trust regularly: As assets change over time, it’s essential to revisit and update the trust to include new acquisitions.

An estate lawyer can guide you through the process and help ensure that all assets are correctly transferred and documented. Remember, a trust only works if it is properly funded. It is a living document that requires ongoing attention. Regularly reviewing and updating the trust ensures it remains aligned with your goals and includes all current assets. Properly funding your trust provides security for your loved ones, avoids unnecessary legal complications and ensures that your legacy is preserved. If you would like to learn more about funding a trust, please visit our previous posts.

References: American College of Trust and Estate Counsel (ACTEC) (Aug. 31, 2023) “Funding Your Revocable Trust and Other Critical Steps” and American College of Trust and Estate Counsel (ACTEC) (Sep 21, 2023) “Tangible Personal Property in Estate Planning”

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What Art Collectors should know about Estate Planning

December 18, 2024

Art collections often hold deep sentimental value, while also being some of the most valuable assets in an estate. As any art collector knows, these pieces represent more than just investments—they carry a legacy, a story and a connection to the collector. However, without a thoughtful estate plan, artwork can face unique risks, from tax impacts to complications in transferring ownership. Here’s what art collectors should know about estate planning to ensure that their collections are preserved and passed on according to their wishes.

For art collectors, estate planning goes beyond finances. Artworks can be valuable assets with historical and emotional significance. Without planning, however, the collection may be subject to significant federal estate taxes, which can reduce what heirs receive. Any lack of clear instructions for the collection could lead to conflicts or, in some cases, force the sale of cherished pieces. According to SmartAsset, an effective estate plan can protect the integrity of the collection and outline specific wishes for its future.

One of the first steps in estate planning for art collectors is creating a comprehensive record of the collection. This involves cataloging each piece with descriptions, condition reports, and, if available, provenance or historical background. These details validate ownership and add to the artwork’s value. For instance, including an exhibition history or previous owners can enhance its worth.

Professional appraisals are crucial in determining each artwork’s fair market value. Appraisals consider the artist’s reputation, historical importance and market demand. Accurate valuations are also essential for estate tax purposes, ensuring that taxes are calculated based on a clear understanding of the collection’s worth.

What are the Tax Implications of Owning Art?

Taxes can significantly impact art collections. The federal estate tax, for example, is calculated based on an artwork’s fair market value at the time of the owner’s passing. The tax burden could often mean heirs must sell a piece to cover these expenses. This is particularly concerning if the estate lacks liquidity, meaning there may not be enough cash to pay taxes without selling assets.

By understanding potential tax liabilities and consulting a professional, collectors can consider strategies to reduce estate taxes, such as placing artworks in trust or donating select pieces to reduce the taxable estate.

Understanding intellectual property rights is crucial for collectors who own works by living artists or have purchased pieces with retained copyrights. Intellectual property can include copyrights, trademarks and any royalties tied to the job. These rights allow for continued earnings and control over how the artwork is displayed, reproduced, or used publicly.

Art collectors should ensure that these rights are documented and decide who will control them after their passing. This can prevent confusion for heirs and ensure that the art collection is managed according to the original collector’s wishes.

How Does Provenance and Documentation Help Protect Your Collection?

Maintaining detailed records on each artwork is more than just good organization—it’s a valuable part of preserving the collection. Provenance, or the history of ownership, verifies an artwork’s authenticity and is especially important for high-value pieces. For example, documentation that records where a piece was displayed or whether it was ever restored adds value and simplifies the transfer process.

Heirs inheriting an art collection will appreciate clear records. Such records support authenticity and value, making it easier for them to handle sales, insurance, or any future artwork exhibitions.

How Can Insurance Safeguard Your Collection?

Art collections face unique risks, including theft, damage and loss. Appropriate insurance coverage is an essential part of estate planning for art collectors. Ensuring that the collection is adequately insured can protect against unexpected financial losses. Regularly reviewing and updating the policy based on current valuations helps keep the coverage relevant, reflecting any changes in value or additions to the collection.

Several strategies exist to help collectors protect and manage their art collections in the long term. Here are some popular options:

Trusts: Placing artwork in a trust allows collectors to control how and when the collection is used or sold. Trusts can help reduce estate taxes and keep details about the collection private, which can be a priority for families or those with valuable, publicized pieces.
Comprehensive Wills: Drafting a will that explicitly addresses art assets can help avoid complications. Collectors can outline whether pieces should be sold, donated, or bequeathed to specific family members or institutions. This is also a way to ensure that the collection is passed on according to the collector’s wishes.
Charitable Donations: Donating to museums or charities can offer tax benefits, allowing art collectors to support cultural institutions, while reducing their estate’s taxable value. Some collectors also establish private foundations to maintain family control over how the artwork is displayed or used in the future.

An art collection can be more than a collection of assets; it’s a legacy that can endure through generations. An experienced attorney can educate art collectors on what they should know about estate planning. By adequately documenting, valuing and securing the collection, art collectors can help ensure its future. If you would like to learn more about planning for items such as art, heirlooms, or other personal property, please visit our previous posts.

Reference: Smart Asset (Jul. 19, 2024) “Guide to Estate Planning for Artists and Art Owners”

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Managing a Vehicle Title Transfer after a Loved One’s Passing

December 11, 2024

Managing a vehicle title transfer after a loved one’s passing can feel overwhelming, especially during an already difficult time. The process varies depending on the estate’s status, the deceased’s will and the state’s specific regulations. However, you can avoid future complications by properly transferring the title.

Determine How the Vehicle was Titled

The first step in transferring a vehicle title is to understand how the title was set up. Some vehicles are jointly titled, meaning another individual may automatically inherit ownership without probate. The car might also be titled solely in the deceased’s name, which likely requires probate to transfer ownership.

Jointly titled vehicles are often more straightforward to transfer, especially if designated as “Joint Tenancy with Right of Survivorship” (JTWROS). In this case, vehicle ownership passes directly to the surviving joint owner. However, the process will require additional legal steps if no joint owner is listed, or the title doesn’t specify JTWROS.

Review the Will or Estate Plan

If the deceased left a will, it’s essential to determine who they designated to inherit the vehicle. The named executor or administrator of the estate is responsible for managing the title transfer, ensuring that the legal ownership matches the deceased’s wishes.

In cases where there is no will, known as intestacy, the state’s intestate succession laws dictate how assets, including vehicles, are distributed. This often means the vehicle may go to a close family member, like a spouse or child. However, the rules vary by state. Consulting the estate plan or legal professional can help clarify any uncertainties regarding rightful ownership.

Complete Probate If Required

The title transfer may require probate if the vehicle was solely titled and there is no joint owner. Probate is the legal process by which a deceased person’s assets are distributed according to their will or state law if no will exists. To initiate probate, the executor typically files the will with the local probate court, which then authorizes the distribution of assets, including the vehicle.

The probate process can take weeks to months, depending on the estate’s complexity and any potential disputes. During this time, the executor must gather all necessary documents to satisfy the state’s probate requirements, including proof of the deceased’s identity, a death certificate and other relevant paperwork.

Gather Necessary Documentation

Once you confirm whether probate is needed, the next step is to gather essential documentation to transfer the title. Generally, you’ll need:

A certified copy of the death certificate
The original vehicle title (if available)
Documentation proving estate executorship (if applicable)
Valid photo ID for the new owner
Title transfer application (available from the DMV or Secretary of State’s office in many areas)

Some states may require additional documentation or affidavits. Contacting your local Department of Motor Vehicles (DMV) or visiting their website can clarify the specifics for your state.

Submit Title Transfer Documents to the DMV

With the required documents, the next step is to visit your local DMV or title agency to submit the paperwork. If probate was necessary, bring documentation verifying that the estate has cleared probate, along with the other materials. The DMV will process the title transfer, though the timeline can vary by state and county.

In some cases, fees apply for the title transfer process. States may also impose specific requirements for emissions or safety inspections before the transfer. Consulting your DMV in advance can help you avoid potential delays and understand any associated costs.

Consider Tax Implications

Transferring a vehicle title after a loved one’s passing may also involve tax considerations. For example, some states have inheritance taxes that could apply, while others may require registration fees for the new owner. It’s wise to consult with a tax professional or attorney to clarify potential financial implications and ensure that the transfer complies with tax laws.

Managing a vehicle title transfer after a loved one’s passing can be challenging, especially with differing state rules. If you would like to learn more about transferring ownership of a vehicle or property after death, please visit our previous posts.

Reference: Capital One (2024) How to Transfer a Car Title When the Owner is Deceased

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Testamentary Trust can Protect your Intellectual Property

November 4, 2024

When managing your estate, people often overlook intellectual property (IP). If you are an artist, inventor, or business owner, your IP can be one of your most valuable assets. Incorporating IP into your estate plan is crucial to ensure that it benefits your heirs, primarily through a testamentary trust. A testamentary trust can protect your intellectual property.

A testamentary trust is created as part of your will and only takes effect after you pass away. It allows you to name a trustee who will manage the trust’s assets, including your intellectual property, to benefit your chosen beneficiaries. According to Forbes, by establishing a testamentary trust, you choose how to handle your IP and ease the burden on heirs.

For those with valuable intellectual property—such as copyrights, trademarks, patents and trade secrets—a testamentary trust can effectively safeguard and distribute these assets after you’re gone.

Intellectual property is often complex and requires ongoing management. Here are a few reasons why a testamentary trust can help:

Ongoing Management Needs: IP may need someone with knowledge of the field to manage it properly. Your beneficiaries might not be familiar with your creations’ legal rights or value, so appointing a trustee ensures that someone experienced handles these responsibilities.
Protecting Financial Interests: If your IP continues to generate revenue (e.g., royalties from books, music, or inventions), a trustee can distribute these funds according to your instructions.
Avoiding Probate Delays: By placing your IP in a trust, the assets can bypass probate, ensuring that they are handled efficiently without long delays or court involvement.

According to Charles Schwab, it’s essential to identify the types of intellectual property you own. Some common forms of IP you might place in a testamentary trust include:

Copyrights: If you’ve created original works, like books, music, or artwork, a copyright allows you to control their use and distribution. These assets can be precious and may need careful management to ensure continued profitability.
Patents: For inventors, patents provide exclusive rights to their creations. By placing them in a trust, you ensure that they are protected and passed on to your heirs in a controlled manner.
Trademarks: Your brand’s name, logo, or symbols may be essential for business success. A testamentary trust can keep these assets intact and help manage any ongoing legal protections they require.
Trade Secrets: If you’ve developed formulas, customer lists, or other confidential business information, you can protect them with a trust. A trustee can make sure they remain confidential and continue to benefit your heirs.

Appointing a knowledgeable trustee is critical to the success of managing your IP. This person or organization will be responsible for protecting your intellectual property, ensuring registrations are maintained and continuing to enforce your rights. They will also distribute any income from the IP according to the terms laid out in the trust.

When setting up a testamentary trust for your intellectual property, you can specify how long the trust will last. For instance, if you own copyrights, these can last for 70 years after your death, which means the trust may need to remain in effect for decades.

Carefully think about the future value of your IP and when it might be best for your heirs to take complete control of the assets. You can set specific milestones, such as when your children reach a certain age or achieve educational goals.

Intellectual property can be a critical asset in your estate plan. However, it requires careful management to ensure that it benefits your loved ones. Using a testamentary trust, you can protect and leverage your intellectual property in ways that align with your values. If you would like to learn more about testamentary trusts, please visit our previous posts.

References: Forbes (Jan. 24, 2024) “What Is A Testamentary Trust?” and Charles Schwab (Jun. 14, 2024) “4 Steps to Help Protect Your Intellectual Property“

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The Safe way to Pass on Family Heirlooms

August 30, 2023

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama. The safe way to pass on family heirlooms is via a trust of will.

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

The safe way to pass on family heirlooms is via a trust of will. Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes. If you would like to learn more about personal property, please visit our previous posts.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

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Things that should Never Belong in Your Will

August 8, 2023

Most people don’t enjoy thinking about their mortality. However, creating a will and related estate planning documents makes it much better for loved ones to handle the estate after your passing. Estate planning attorneys know there are certain things that should never belong in your will, says this recent article, “13 Things You Should Never Put In Your Will” from mondaq.

Joint accounts. Accounts owned jointly or with beneficiary designations pass directly to the surviving owner or beneficiary. Putting these items in your will can create confusion and even open the estate to potential litigation.

Personal and private wishes. Don’t use your will to take a stand on family relations or address personal issues from the grave. Settling old scores in a will is a bad idea, as your will becomes a public document, and anyone who wants to can see it.

Business interests for an active business. If your will contains information about a business, it could be easier for the business to function while your estate is being settled. A succession plan and buy-sell agreement are the tools for active businesses, not your will.

Life Insurance. Passing your life insurance policy through a will could lead heirs to lose up to half or a large percentage of estate taxes. Speak with your estate planning attorney about using a life insurance trust instead.

Secure or secret information. Whether personal or business-related, private information will not remain private if it’s in the will. Your will goes through probate and becomes part of the public record, available to prying eyes. Don’t include bank account information, access codes, PIN passwords, keys to crypto, etc.

Significant assets. Even though wills are used to pass assets to heirs after death, this isn’t always the best way to distribute wealth. For instance, if you leave your interest in a business through a will, the court may end up with oversight of their share of the business during probate. Probate also provides a forum for someone to contest their will. Trusts are better tools for leaving assets, since they provide privacy, allow you to dictate highly specific terms and are controlled by a trustee with no court involvement.

Ambiguity. Don’t use vague or general language and expect heirs to figure things out. “I leave my favorite painting to my favorite niece” opens up a world of trouble for the family. The more information you can provide the better. Even if you only have one niece, which is your favorite painting? Similarly, a will directing assets to be left “equally to my two children” won’t work if you’ve welcomed another child into the family.

Assets going through probate when there are other options. Most estate plans are designed to avoid assets going through probate whenever possible. Trusts, beneficiary designations, or gifting while you are living, can simplify distributing assets and avoid probate costs.

Tangible personal property. Jewelry or a valuable art collection should not be bequeathed through a will. These assets may require a professional appraisal, which could delay probate. Instead, assign the property to a trust or leave detailed information outlining how you wish the property to be distributed with the executor.

Funeral and burial instructions. Wills are often read long after funerals have taken place. Your wishes won’t be known or followed. Discuss your preferences with loved ones and document them separately. If you make arrangements in advance with a cemetery and a funeral home, you’ll have the most control over your funeral. Advance planning is a great kindness for your loved ones.

Conditions on gifts and unenforceable conditions. Imposing too many restrictions could complicate your estate and create disputes between beneficiaries. Your wishes will be better set out and made legally enforceable through trusts.

It does not take much to invalidate a will. The things listed above should never belong in your will. Similarly, unenforceable conditions can create controversy and delay the administration of your estate. Discriminatory clauses, illegal actions, or conditions violating a person’s rights can render your entire will or the specific provisions invalid. An experienced estate planning attorney will help you draft a will that is legally sound and secure. If you would like to learn more about wills, please visit our previous posts.

Reference: mondaq (July 10, 2023) “13 Things You Should Never Put In Your Will”

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Consider these Overlooked Elements in your Planning

April 26, 2023

When creating an estate plan, consider these overlooked elements in your planning. There are details which seem minor but are actually very important, says a recent article from mondaq, “Four Provisions People Often Forget To Include In Their Estate Plan.”

Don’t forget to name alternative beneficiaries and executors. If the will names a beneficiary but they are unable to take possession of the property, or they are deceased, the asset will pass as though you didn’t have a will at all. In other words, the state will determine who receives the property, which may not be in accordance with your wishes. If there’s an alternate beneficiary, the property will go to someone of your choosing. A backup executor is also critical. If your primary executor cannot or does not want to serve, the court may appoint an administrator.

Personal possessions, including family heirlooms. Most families have items with great sentimental value, whether or not they have any financial value. Putting a list in your will makes it very difficult if you want to change your mind over time. It’s best to have a personal property memorandum. This is a separate document providing details about what items you want to give to family and friends. In some states, it is legally binding if the personal property memorandum is referenced in the will and signed and dated by the person making the will. A local estate planning attorney will know the laws regarding personal property memorandums for your state.

Even if this document is not legally binding, it gives your heirs clear instructions for what you want and may avoid family arguments. Please don’t use it to make any financial bequests or real estate gifts. Those belong in the will.

Digital assets. Much of our lives is now online. However, many people have slowly incorporated digital assets into their estate plans. You’ll want to list all online accounts, including email, financial, social media, gaming, shopping, etc. In addition, your executor may need access to your cell phone, tablet and desktop computer. The agent named by your Power of Attorney needs to be given authority to handle online accounts with a specific provision in these documents. Ensure the list, including the accounts, account number, username, password and other access information, is kept safe, and tell your executor where it can be found.

Companion animals. Today’s pet is a family member but is often left unprotected when its owners die or become incapacitated. Pets cannot inherit property, but you can name a caretaker and set aside funds for maintenance. Many states now permit pet owners to have a pet trust, a legally enforceable trust so the trustee may pay the pet’s caregiver for your pet’s needs, including veterinarian care, training, boarding, food and whatever the pet needs. Creating a document providing details to the caretaker concerning the pet’s needs, health conditions, habits and quirks is advised. Make sure the person you are naming as a caretaker is able and willing to serve in this capacity, and as always, when naming a person for any role, have at least one backup person named.

Make sure your consider these overlooked elements in your planning. Discuss all of your options carefully with an experienced estate planning attorney. If you would like to learn more about drafting an estate plan, please visit our previous posts.

Reference: mondaq (March 16, 2023) “Four Provisions People Often Forget To Include In Their Estate Plan”

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Include your Memorabilia in your Estate Planning

March 20, 2023

Do you have a shoebox full of old baseball cards? Or perhaps an old collection of action figures from the many Star Wars movies? This memorabilia certainly has value to you, and you may want to pass it down to your family. The best solution is to include your memorabilia in your estate planning. Kiplinger’s recent article entitled “Estate Planning for Memorabilia Collectors: Don’t Leave Your Family in the Lurch” says the first step is to know what you have. Make a thorough and updated inventory to help your family understand the scale of the collection and where the items are located. Make sure the inventory is current and has detailed information about the items, like if a piece of memorabilia is signed or if it was game-used.

It’s also wise to log valuations along with the items’ description. You can try to stay on top of when comparable items sell at auction and follow industry publications to keep your valuations as current as possible. Every sector of collectible is different. Some items see their valuations fluctuate more than others. Even so, it’s helpful to have a ballpark idea of the total value of the collection. At some point, it might be worth hiring an appraiser to give you a formal valuation of the collection.

As far as authentication, many items need supporting paperwork to verify they’re legitimate. As you plan for your family to handle the sale of your items, they’ll need to know that those documents are an essential part of the collection and where they are.

When you’re walking them through your inventory, note where the items are identified as having separate certificates of authenticity and make sure they know where to find them. This can be as simple as using file folders.

When it comes time to sell, where does your family go Whether it’s sports memorabilia, coins, stamps, or just about anything else, there are dealers who are willing to purchase the collection. If you go into a collectibles shop that’s only buying items they plan to resell, you can expect to get about half of a collection’s actual value.

You can help your loved ones by making connections with auction houses that would be interested in bringing your collection up for sale. This can be a highly specialized area, so you’ll be saving your beneficiaries a big pain if you give them information about where they will get a fair price. Speak with your estate planning attorney about how to include your memorabilia in your estate planning. If you would like to learn more about managing personal property, please visit our previous posts.

Reference: Kiplinger (Feb. 26, 2023) “Estate Planning for Memorabilia Collectors: Don’t Leave Your Family in the Lurch”

Consider placing your Home in a Property Trust

March 7, 2023

Property trusts allow you to place your personal residence or any property you own into a trust to be given to a beneficiary, explains a recent article, “When Should I Put My Home in a Trust,” from yahoo!life.com. Consider placing your home in a property trust. A property trust makes it far more likely your home will go to its intended beneficiary.

The property trust can be a revocable or irrevocable trust. Which one you use depends on your unique circumstances. If it’s a revocable trust, you can change the terms of the trust up until your death. However, because you maintain control of the asset in a revocable trust, it’s not protected from creditors.

If the main reason you’ve put the house into a trust is to protect it from creditors, a court could reclaim the asset if it were determined the sole reason for the transfer into the trust was to elude creditors.

Generally speaking, people have three basic reasons to place their homes into property trusts—to avoid probate, to keep their transaction private and to keep the transfer simple.

Avoiding probate. People who put their homes in a property trust often do so to avoid having their home going through the probate process. When the owner dies, their estate goes through this court process and any debts or taxes owed on the property are paid. If there is no will giving direction to how the property should be distributed, then it is distributed according to the state’s laws.

If the home is not in a trust and not mentioned in a will, the property will usually go to a spouse or child, although there’s no guarantee this will happen. If there is no spouse and no offspring, the property will go to the next closest living relative, such as a parent, sibling, niece, or nephew. If no living relative can be found, the state inherits the property.

Chances are you don’t want the state getting your family home. Having a will, even if you don’t put your property into a trust, is a better alternative.

The cost and time of probate is another reason why people put their homes in trusts. Probate costs are borne by the estate and thus the beneficiaries. Probate also takes time and while probate is in process, homes need maintenance, taxes need to be paid and costs add up. If the house is sitting empty, it can become a target for thieves and property scammers.

Another benefit of a property trust is to keep the transfer of the home private. If it goes through probate, the transfer of property becomes part of the court record, and anyone will be able to see who inherited the home. When family dynamics are complicated, this can create long-lasting family battles.

A property trust is also far simpler for your executor, especially if the home is in another state. If you have a vacation home in Arizona but live in Michigan, your executor will have to navigate probate in both states.

Speak with an estate planning attorney if you want to consider placing your home in a property trust. They will create a property trust and transfer the property into the trust. This is a straightforward process. However, without the guidance of an experienced professional, mistakes can easily be made. If you are interested in reading more about managing property in your estate plan, please visit our previous posts.

Reference: yahoo!life.com (Jan. 31, 2023) “When Should I Put My Home in a Trust”

Young Professionals Need Estate Planning

December 28, 2022

Even those whose daily tasks bring them close to death on a daily basis can be reluctant to consider having an estate plan done. However, young professionals, or high-income earners, needs estate planning to protect assets and prepare for incapacity. Estate planning also makes matters easier for loved ones, explains a recent article titled “Physician estate planning guide” from Medical Economics. An estate plan gets your wishes honored, minimizes court expenses and maintains family harmony.

Having an estate plan is needed by anyone, at any age or stage of life. A younger professional may be less inclined to consider estate planning. However, it’s a mistake to put it off.

Start by meeting with an experienced estate planning attorney in your home state. Have a power of attorney drafted to give a trusted person the ability to make decisions on your behalf should you become incapacitated. Not having this legal relationship leads to big problems. Your family will need to go to court to have a conservatorship or guardianship established to do something as simple as make a mortgage payment. Having a POA is a far better solution.

Next, talk with your estate planning attorney about a last will and testament and any trusts you might need. A will is a simpler method. However, if you have substantial assets, you may benefit from the protection a trust affords.

A will names your executor and expresses your wishes for property distribution. The will doesn’t become effective until after death when it’s reviewed by the court and verified during probate. The executor named in the will is then appointed to act on the directions in the will.

Most states don’t require an executor to be notified in advance. However, people should discuss this role with the person who they want to appoint. It’s not always a welcome surprise, and there’s no requirement for the named person to serve.

A trust is created to own property outside of the estate. It’s created and becomes effective while the person is still living and is often described as “kinder” to beneficiaries, especially if the grantor owns their practice and has complex business arrangements.

Trusts are useful for people who own assets in more than one state. In some cases, deeds to properties can be added into one trust, streamlining and consolidating assets and making it simpler to redirect after death.

Irrevocable trusts are especially useful to any doctor concerned about being sued for malpractice. An irrevocable trust helps protect assets from creditors seeking to recover assets.

Young professionals need estate planning because not being prepared with an estate plan addressing incapacity and death leads to a huge burden for loved ones. Once the plan is created, it should be updated every three to five years. Updating the plan is far easier than the initial creation and reflects changes in one’s life and in the law. If you would like to read more about estate planning for business owners, please visit our previous posts.

Reference: Medical Economics (Nov. 30, 2022) “Physician estate planning guide”

Category: Personal Property

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