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Family trusts are legal mechanisms providing users with multiple benefits, including probate avoidance (which the American Bar Association (ABA) states is the legal procedure that recognizes a will and nominates an executor to manage the estate and disburse assets to beneficiaries), timely asset distribution, and tax advantages, but they also have some disadvantages, such as ongoing administrative duties and initial start-up costs. To determine whether placing a home in one of these vehicles is worthwhile for a person’s circumstances, they may want to evaluate these pros and cons. In this post, you can learn more the benefits of placing your home in a family trust.
Trusts refer to legal mechanisms concerning asset management, which involve three key parties, namely, a grantor (or settlor), a trustee, and beneficiaries. Grantors are those who establish the trust and place their assets into the legal vehicle, beneficiaries refer to the parties who benefit from the trust, and trustees are the individuals or entities responsible for managing the trust’s assets on the beneficiaries’ behalf. Family trusts specifically list family members, such as siblings, children, grandchildren, cousins, uncles, and aunts, as well as spouses, as the trust’s beneficiaries.
These trusts are living trusts, defined by the ABA as trusts created during a person’s lifetime, and can be either irrevocable or revocable, depending on the grantor’s wishes. Irrevocable trusts are permanent and do not allow grantors to control the assets within them (meaning these assets do not usually incur estate taxes and are not vulnerable to creditors), whereas settlors can alter or terminate revocable trusts whenever they want, but without the benefit of creditor protection or estate tax avoidance. When establishing revocable family trusts, grantors may act as the trustee and nominate a successor in the event of their death or incapacitation, but for irrevocable family trusts, settlors must name a different person/entity to perform the role of trustee.
One of the main reasons why people may place their house in a trust is that home ownership passes efficiently and smoothly to the beneficiaries upon the property owner’s death. A trust makes this possible due to three factors, as outlined below.
Trusts avoid probate, the court process whereby a judge determines a will’s validity and supervises asset distribution. This procedure can be heavily involved, lengthy, and expensive, which can lead to beneficiaries receiving a smaller share of the assets left to them and experiencing delays in obtaining them. By placing a home in a trust, the probate court does not concern themselves with the asset, meaning beneficiaries can acquire possession of the home more quickly.
Wills are subject to probate, meaning homes left via these documents undergo a public legal process. By contrast, when an individual places their home in a trust, the home may circumnavigate probate, allowing matters concerning the property to remain private. This can mitigate family conflict and prevent legal challenges regarding the asset.
Placing a home in a trust can simplify the trustee’s responsibilities, compared to if the home passed on via a will and the person acting as the trustee was instead the executor of the estate. This is due to them not having to navigate probate; instead, they can focus on fulfilling the grantor’s wishes as outlined in the trust’s terms. Since the trustees of family trusts may have known the settlor well, these reduced duties are likely to be beneficial to trustees when they are grieving for the grantor’s loss.
Acquire a further understanding of the advantages of putting a home in a family trust, and find out how Rhodium Law, LLC may aid people with their estate planning queries. Contact our firm today to discuss your legal requirements with an experienced Ohio estate planning lawyer.
Some of the other advantages of putting a home in a trust involve multi-state probate procedures and asset protection. Regarding the former, say, for instance, that the grantor owns a home in one state and another property in another state. Upon the grantor’s death, they will undergo different state probate processes.
However, placing the other property in a trust helps prevent executors from incurring this additional work. In terms of the latter, during the grantor’s lifetime, if the settlor chooses a person other than themselves to act as a trustee, and the grantor becomes incapacitated, the trustee can look after the home on the settlor’s behalf and protect the asset for the beneficiaries’ benefit.
While placing homes in family trusts affords many benefits, there are also drawbacks. These are as follows:
The steps for placing a home in a trust generally involve determining whether the grantor wants an irrevocable or revocable trust, nominating trustees, beneficiaries, and backups of each, creating the trust documentation, providing the trustee with up-to-date copies of these documents, and transferring home ownership to the trust by issuing a new property deed. Finally, the grantor should provide the county’s property records office with a copy of the revised deed, indicating that ownership of the home has transferred to the trust.
Utilizing family trusts can help individuals keep wealth within their family, but doing so requires considering which type to opt for, as revocable and irrevocable trusts offer different benefits and drawbacks. In addition to assisting with this decision, an Ohio estate planning attorney may help with overcoming the complexities of establishing these trusts and offer advice regarding other vital estate planning tools, such as wills, powers of attorney, and advanced directives. Explore the benefits of placing a home in a family trust in greater detail, and discover how a knowledgeable Ohio estate planning law firm can assist people with their estate planning concerns. Call Rhodium Law today at (216) 699-8145.
