In my last article I discussed the Court process known as Probate and its many pitfalls. In this article, I will focus on avoiding Probate if you own real estate. Your home is usually your most important and most valuable asset. Therefore, it is an asset that you want and need to protect for your families. In most cases, if a person passes away with real estate titled solely in their name, their beneficiaries will have to go through the Court process of Probate before they can access, sell, transfer, or rent the property. The Probate process can take months, even years to complete, and can also cost your family thousands of dollars in Court and Legal fees. In order to avoid Probate if you own real estate, it is often advisable to establish a Living Trust and make that Living Trust the owner of your real property. A Living Trust is an agreement, usually between family members, established by you where a person known as a trustee (usually one of your children) holds the Trust property for your benefit. Even though the property is part of a trust, you can retain most ownership rights over the trust property during your lifetime. The trusts are usually written to permit you to continue to live in the property, collect rents and pay the expenses of the property.
Transferring the deed of your property to a Living Trust usually enables you to retain any tax benefits you may be getting on the property, such as the STAR program and your capital gains exclusions. In most cases, the property in a living trust cannot be sold without your consent. Upon your death, the property in the trust passes to the designated trust beneficiaries without the need for Probate. In many cases, in addition to avoiding Probate, these Living Trusts can also be used to protect the property from nursing home bills and expenses associated with Long Term Care. In attempting to avoid Probate, one mistake some people make is putting their children name’s on their deeds without using a living trust. If you put your child’s name (or anyone’s name) on your deed without a trust, that person becomes the owner of your home and several unforeseen problems can occur. Your home could be exposed to that persons creditors if they get sued or divorced, and you could lose your lifetime rights over the property, including your tax benefits, rental income and even your right to live in the property. These problems generally do not occur if the property is held in a living trust. In addition, if you put your child’s name on the deed without a living trust, there could be issues with ownership of the property in the event your child predeceases you. Having a Living Trust enables you to preserve your home for your family while allowing you to retain lifetime benefits of the property. It is important to remember that there are many types of Living Trusts and everyone’s situation is different, therefore, you should make sure you speak to an attorney with experience in the area of Living Trusts to get the right advice to fit your situation.
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