We don’t really like to think about it or plan for it, but we should. And that is what will happen to our assets after we’re gone, especially our home. A trust is a good option here because it will avoid the long, drawn-out process of probate. Trusts aren’t just for wealthy people with a large estate – they are also for the average homeowner. But maybe you’re still not convinced a trust is right for you. In that case, here’s how to know if you should put your Newark home into a trust.
What Is a Trust?
The first step toward knowing if you should put your Newark home into a trust is gaining some understanding of just what a trust is. So . . .
“A trust is a legal entity that allows property to be passed from the person who created the trust (the grantor) to the person they want to pass their property to (the beneficiary). A trustee oversees the trust and manages the assets in the trust on behalf of the beneficiary, according to the grantor’s instructions.”
Here’s an illustrative example from the financial pros…
Suppose you have $20 that you “want to give that $20 to your daughter, Muriel so that she can use it when she goes to the movies on Saturday. However, you don’t want to give it to her yet, because you know that she’ll spend it on something else if you give it to her before Saturday. You’re going to be pretty busy Saturday, and aren’t sure you’ll be around to give her the $20. So you decide to give the $20 to your sister, Martha, and ask that she holds into it until Saturday, at which point she would give the money to Muriel.”
In this example, “you are the grantor, Martha is the trustee and Muriel is the beneficiary. If, instead of giving the money to Martha, you held onto it to give to Muriel yourself, you would be both the grantor and the trustee.”
This is, of course, a simplified illustration, but it provides the general outlines. For an actual trust, you’d have to enlist the aid of an attorney to create a legal trust document.
If you put your Newark home into a trust, you’ll enjoy certain benefits. Chief among these are . . .
Probably the biggest benefit of putting your home into a trust is that you’ll avoid probate, which wouldn’t be the case with a will. And the three main reasons to avoid probate are that it is . . .
- Expensive – “Probate is the legal process through which the court ensures that, when you die, your debts are paid and your assets are distributed according to the law. Legal fees, executor fees, inventory fees (county taxes), and other costs have to be paid before your assets can be fully distributed to your heirs.” It could wind up costing your estate tens of thousands of dollars.
- A long process – “The standard probate process takes a minimum of 5 months to complete. . . . More often, though it “takes 9 months to a year to resolve simple cases (and several years for contested cases).”
- Public – Probate is a public matter, so your family will have no privacy. “[A]nyone can see the size of your estate (often what you actually owned), who you owed debts to, who will receive your assets, and when they will receive them. The process invites upset heirs to contest your will and can expose your family to greedy creditors and potential fraudsters.”
Keeping Financial Matters Private
As we just pointed out, the probate process is public, but because there is the probate court process with a trust, your financial matters and assets remain private. Typically, the only people who ever see a trust, which means your financial affairs, are the named beneficiaries.
Protection Against Incapacity
“If you become incapacitated during your life, then a living trust can protect your family from undergoing a conservatorship. A conservatorship is when a court-appointed guardian is given the authority to manage an incapacitated person’s financial matters for them. This feature of a living trust is especially comforting to families in times of difficulty since they do not have to worry about going to court and requesting access to the incapacitated person’s finances.”
While the pros usually outweigh the cons, you should still be aware that if you put your Newark home into a trust, you’ll face certain drawbacks . . .
To ensure that ownership of your home is effectively and legally transferred to you as the trustee, you’ll have to take care of more paperwork. So you’ll have to prepare and transfer a new deed to show that the property is owned by the trust and not by you the individual.
More Accurate Record Keeping
“Once you create a living trust you don’t need separate income tax records if you are both the grantor and the trustee. Any income you receive from property that you are holding in the trust will simply be reported on your personal tax returns. However, if you transfer property in or out of the trust, you need to keep accurate written records. This isn’t difficult, but it’s easy to forget if it has been a few years since you created your trust.”
How to Put Your Home into a Trust
If you opt to put your Newark home into a trust, here are the basic steps to take . . .
- Choose a successor trustee to “take control of the trust once you pass away”
- Name your beneficiaries
- Prepare the trust agreement, the “document that outlines the details of the trust”
- Fill out a new deed to move your home into the trust
- Sign the document before a notary
- Record the trust document at the appropriate county office
Get Some Professional Assistance
Preparing for what will happen to your home after you pass away may not be easy, but it can definitely provide some peace of mind. One of the best instruments to accomplish that in the most effective and expeditious way is a trust. But you probably need the assistance of an attorney and a local real estate agent. If you think you want to put your Newark home into a trust, contact us today at (848) 299-4847.