A home and other real estate is perhaps the most complex and regulated kind of property most people own. So, it is a good example of why a trust can be such a useful tool for estate planning. Established correctly, a living revocable trust can help make difficult estate plans much easier and more flexible.
What is a living revocable trust?
The basic idea of any trust is that a “grantor” places their assets into the control of a trustee, with legal conditions limiting what the trustee can do with assets. This trustee manages the assets for the beneficiaries the grantor has named. One excellent feature of trusts is that the grantor, trustee and beneficiary can be three different people (or entities), all the same person or some combination.
In a living revocable trust, you might establish the trust with, if you wish, yourself as the trustee. Upon your death, the assets in the trust are finally and for the first time left to the beneficiaries, who otherwise would be the heirs named in your will.
The result like using a will but with many added advantages. For example, the assets in a trust can skip probate court, unlike those described by a will.
Skipping probate or even probates in multiple states
Consider a case where you have real estate in more than one state, such as a second house in Florida and a cabin in Maine. It can come as a terrible surprise to people’s heirs when they realize they must go through probate in New York, and then they must also go through a second set of probate proceedings in a second state (or more states, depending on the number of states in which their loved one owned property).
This “ancillary probate” follows the laws in each separate state. Those laws can differ dramatically across the country. The executor of your estate may have to ask each of the other states to appoint them again, assuming the state’s rules do not make them ineligible. Or, for example, some states require executors to issue a surety bond of one size or another, while others do not.
Being careful when funding a trust with real estate
One downside of a revocable living will is that you essentially pass ownership of property to the trust, and this takes paperwork. Your title, title insurance, taxes and more are affected by this transfer and takes some time, expense and attention to get it all done correctly.
In a way, you are taking on a small part the time, effort and perhaps risk that your heirs would otherwise later use in probate court, and perhaps in several probate courts.