Home ownership is exciting, but it also comes with great responsibility. Your financial future and family legacy are tied to the home you own, and you must think strategically about both as you decide whether to place your new home in a trust.
A trust is a fiduciary agreement allowing you (the trustor) to appoint a third party (trustee) to hold and manage your assets when you can no longer do so. Homeowners need to understand the pros and cons of including their new home in this type of agreement so they can be confident in their decisions for their family’s future.
The Pros of Using a Trust for Your New Home
Trusts have long been a cornerstone of good estate planning. The following are a few ways people use trusts to their financial advantage.
Probate refers to a court proceeding that validates and recognizes a deceased person’s will and appoints an executor to distribute that person’s assets accordingly. It may sound simple, but probate is often a lengthy, expensive, and emotionally draining process.
When you have a trust, you have already done the legwork in advance. Consequently, probate becomes unnecessary. You can rest assured that your beneficiaries will receive your assets shortly after your death with no issues, even for properties in another state.
You may not know that probate proceedings are part of public records, which means anyone can see information about your family’s financial records. Because a trust keeps your home and other assets out of probate court, placing your home into a trust can maintain and protect your family’s privacy even when you cannot do so yourself.
Appointing a Successor
It’s difficult enough to think about what will happen when we pass away. You may not have considered the possibility of suffering an illness or severe injury and becoming incapacitated before that time. A trust allows you to appoint a successor who can take control of your estate in case the unthinkable happens. You’ll benefit from knowing someone you know and trust is managing your assets.
The Cons of Putting Your Home in a Trust
While trusts have a solid reputation as being financially beneficial, homeowners may encounter a few significant issues when attempting to set up a new trust or change their existing one.
Setting up or amending a trust to include a new asset requires complicated legal and financial paperwork. You may jeopardize your trust’s legal standing if you don’t correctly draft your documents with the necessary legal language or make a mistake in the asset title transfer process. You must decide whether you are comfortable with taking on this risk.
Keeping Up with Changes
You cannot set up a trust and forget about it until you pass away. To assure financial protection for your assets and your family, your trust needs continual updating to accommodate changes in your life and family. These amendments also require extensive paperwork and proper filing.
Getting an Attorney’s Advice
Placing your new home in a trust has many advantages. However, it’s also a complex process that can have significant financial impacts if not done correctly. If you’ve just purchased or built a home and are considering adding your new property to your trust, contact an Estate Planning, Wills, and Trusts attorney in Orange County, CA.
Our legal team at OC Wills & Trusts can help you decide wisely about your home in light of your overall estate plan and give you peace of mind about maintaining your family’s legacy no matter what comes your way.