The Benefits of Holding Real Estate in a Trust

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Once, it was believed that only the extremely wealthy used trusts to hold real estate and other assets. However, today, more and more individuals are choosing trusts because of the privacy they extend, as well as tax and estate benefits. One of the most common trusts to hold real estate and major assets in is the Living Trust. A Living Trust is separate and apart from a Will. This legal document allows you to transfer real estate, recreational vehicles, antiques, art, mutual funds and more into a revocable trust that you (or your designated trustee) controls until your death. You can make changes to the trust at any time – remove property, add property and change beneficiaries at your discretion.

Benefit #1:  Avoid Probate Costs and Delays

By placing your assets including real estate, into a Living Trust, you can save your heirs time and the estate money by completely avoiding probate. A Living Trust specifies where and to whom all of your assets go upon your death, automatically without the need for probate courts or attorneys. Even with a Will, your heirs can face probate of months or years. With a Living Trust, assets can be distributed according to your specifications often within weeks.

If you own real estate or large assets in multiple states, if you have a Will and no Living Trust, each property will have to go through probate in the home state. This can add months, if not years to the distribution of your assets and cause hassle and frustration with your heirs.

Benefit #2:  Privacy

The “information age” has crossed over into the “age of no privacy.” Today, many states and counties have public sites where real estate property information is readily available. Many individuals are shocked to learn that not only is the address and name of the owner listed but also the date property was purchased and for how much, in addition to the property taxes and the lien holders. By holding real estate in trust, it is much easier to conceal the identity and personal details of the owner. In addition to the privacy from prying eyes on government websites unlike a Will, a Living Trust is not made public upon your death. Your estate is distributed in private. With a Will and Probate court, all of the information becomes public record.

Benefit #3:  Save Money

While a Living Trust may be more expensive to draft than a Will, the long-term financial benefits are worth the upfront investment. Transferring your real estate into a trust provides for additional levels of asset protection but often less legal fees. Seek an accountant well versed in estate planning for the best analysis.

Mortgage companies were once opposed to individuals holding real estate in Living Trusts. However, many have loosened their guidelines. In most states, you can transfer your real estate holdings into a Living Trust through a Quit Claim Deed after the funding of the mortgage. This is often the quickest way to complete the transfer. It is important to note that when you transfer the property into the Trust, be sure to immediately update your property insurance to reflect the name of the Trust. Do not hold the property insurance in your personal name as this may (and often does) invalidate the insurance in the event of catastrophe or other event.

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