Everything you should know about putting your house in a trust. Have you thought about possibly putting your home in a trust? Here is everything you should know.
According to experts, placing your house in a trust includes avoiding probate court, saving on estate taxes, and possibly protecting your home from certain creditors. Disadvantages include the cost of creating the trust and the paperwork.
There are also differences between creating a trust and creating a will for your hard-earned property.
Many people assume that if they have a will, they don’t need a trust. But this isn’t always the case.
While both a will and a trust are legal documents that can be similar and deal with your assets and the possession of your assets after your death, there are several key differences between them.
With a will, your asset distribution will be handled through the court system in a legal process known as probate. This can be a lengthy process and can also be an expensive one. This also requires the people involved to attend court dates, which can take up a lot of time and effort. With the formation of a trust, these types of legal hurdles can be avoided.
A trust outlines what needs to be done in terms of asset distribution without the courts being involved. Because of this, distributions can take a few weeks instead of several months or years.
Rather than handing your loved ones a bill for attorney fees to navigate the probate process, you will pay an attorney up front to draft the trust document. The final benefit to consider when choosing a trust despite already having a will is that trusts are kept private. With a will, anyone can see who received what and how much. But none of this information is accessible when locked away in a trust, Experts at Castle Wealth Management said.
However, not all assets require a trust. A will is ideal if you deal with assets like furniture or even precious jewellery, but a trust could be more suitable for houses, vacation homes or investment portfolios. The easiest way to explain it would be to say that a trust is ideal if you have more expensive assets.
According to some real estate experts, while placing your home in trust generates no extra favourable tax treatment, you may save some estate taxes if your trust is designed correctly. Much depends on how efficiently your financial plans for your estate have been constructed. Since living trusts are revocable, allowing changes or even dissolution at any time, the trust and the grantor enjoy no beneficial tax treatment. Creating a trust without a good estate plan often saves little or no tax consequences.
There are some disadvantages of putting your house in a trust too. Your other assets could still be subject to probate, whether or not you also have a will. Even modest bank or investment accounts named in a valid trust must go through the probate process. The estate may face more expenses, as the trust must file tax returns and value assets, potentially negating the cost savings of avoiding probate.
But that is not always the case. Since a trust will usually spare your loved ones from the probate process when you pass away, putting your house in a trust will save your children or spouse from the hefty fee of probate costs, which can be up to 3 per cent of your asset’s value, according to experts.
A trust is also important if multiple properties are involved in different states; since then the probate process will have to deal with varying state laws and numerous court dates at other locations.
We hope our article helped you decide whether you need to put your assets in a trust or leave it in a will. Do consult with a professional to plan out the details.