If you are like many homeowners, your home is likely your family’s most valuable and treasured asset. To ensure your home will pass to your heirs in the most efficient and safe manner possible, you want to plan wisely.
Proper estate planning is as much a part of responsible homeownership as having homeowners’ insurance or keeping your home’s roof well maintained. When it comes to including your home in your estate plan, while you have different planning options to choose from, for a variety of different reasons, putting your home in a Trust is often the smartest and most beneficial choice.
What Is A Trust?
In simplest terms, a Trust is an agreement between the “Grantor” (the person who puts assets into the trust) and the “Trustee” (the person who agrees to hold and manage those Trust assets) for the benefit of the “Beneficiary.” Now, when the Trust is a Revocable Living Trust, this agreement is typically made between you as the Grantor, and you as the Trustee, for the benefit of you as the beneficiary.
Why would you want to make an agreement with yourself, to hold title to assets for yourself, for the benefit of yourself? Because by doing so, you remove those assets from the jurisdiction of the court, in the event you lose capacity or pass away. With a revocable Trust, you give the power over those Trust assets to your successor Trustee to handle without government or court intervention. Instead of public court procedures that would be necessary without Trust planning, you can keep it all totally private, easy and efficient, with Trust planning. This saves your family significant time, money, and aggravation.
Types of Trusts
While there are numerous different types of Trusts available, when it comes to passing your home to your heirs, the two most commonly used Trusts are a Revocable Living Trust and an Irrevocable Trust.
Revocable Living Trust
When using a Revocable Living Trust, you are in control and can change the Trust’s terms or even terminate the trust completely at any point while you are living, hence the term “living” Trust. You typically act as your own Trustee during your lifetime, and then you name someone (and ideally more than one person to serve in succession) as a successor Trustee to take over management of the Trust when you’re no longer here or in the event of your incapacity.
Unlike a Revocable Living Trust, an Irrevocable Trust is (as the name implies), irrevocable. This means that the terms of the Trust cannot be changed, and the Trust cannot be terminated once it’s been properly signed. When you transfer assets into an Irrevocable Trust, you relinquish all ownership of the assets, and the Trustee you have named takes total control of the assets transferred into the name of the Trust. Because you no longer own the assets held by the Trust, those assets are no longer considered part of your estate, and they eventually will not be vulnerable to creditors (for instance, Medicaid is a creditor) or lawsuits, as long as the Trust is properly constructed.
For a trust to function properly, it’s not enough to simply list the assets you want the Trust to hold. When you create your Trust, you must also transfer the legal title of your home and any other assets you want held by the Trust from your name into the name of the Trust. Retitling assets in this manner is known as “funding” your Trust.
Schedule a Legal Life Planning Session with us today to review your assets - including your home and discuss the options you have to protect them for generations to come. Contact us at 718.514.7575 to learn more about which trust is appropriate for your family.