Some people benefit from placing their home in a living trust.
A house is a valuable asset.
For many, it is their most significant investment.
We certainly have seen a run up in home values of late, yes?
Estate planning for these larger assets requires intentional preparation.
One route people can take is to create a living trust to hold the home.
According to a recent Yahoo Life article titled “Why You Should Put Your House in a Living Trust,” people choosing this route should take particular care to avoid common mistakes.
What are some common errors?
Failing to retitle the home to the living trust.
If you do not retitle your home to the trust, you forfeit the benefits this estate planning tool provides.
Instead, you will have spent money to create a less-than-optimal trust.
Failing to notify tenants of the change in ownership.
This does not apply to those who live in the house rather than rent it.
If you do rent a house retitled to a trust, you will need to let the tenants know about the change in landlords.
Additionally, you should create a new bank account for the trust to collect rent deposits.
Not notifying the insurance company of ownership change.
This step is crucial.
If you fail to update the insurance company about the change in ownership, the insurance company may deny (at worst or balk at best) to pay a claim should the house experience damage.
The actual property owner would not have been insured.
Not notifying the bank holding the mortgage of the intended transfer.
Does your mortgage have a “due on transfer” clause?
If yes, this means the mortgage balance must be payed at the time of the transfer from you to the trust, unless exempted by the.
Be sure to work with your estate planning attorney on this to ensure that your “home” qualifies under the Act.
Banks may also treat the property differently when owned by the trust.
For example, it may be more difficult to secure loans against the home should you need them in the future.
Although placing a home into a living trust requires effort, it can be worth it for the protection it provides.
Those who are partners but not married may face backlash from relatives of the deceased if the home is left through a last will and testament.
If a living trust is used to transfer the home to the partner, this asset will bypass probate and relatives will be less likely to interfere.
Another benefit to utilizing a trust is it allows you to retitle assets if you choose to informally change your name.
Finally, a trust is helpful if you have a child with special needs.
Perhaps your home has been renovated and customized to maximize independence for your adult child.
By inheriting the house directly, any government benefits or services will be jeopardized.
To preserve access to these benefits, you can leave the home to your adult child through a Supplemental Needs Trust.
Although not everyone would benefit from placing their home into a living trust, you should talk with your experienced estate planning attorney to determine if this option is best for you.
Reference: Yahoo Life (Jan. 10, 2022) “Why You Should Put Your House in a Living Trust”