You may want your real estate in a family trust, but can you buy real estate in the name of your family trust? Let’s lay the foundation for this discussion. First, a revocable living trust is a very good estate planning tool. It allows you to avoid probate and all the costs and delays associated with probate. If you don’t use any tools to avoid probate, or if you only have a regular Last Will and Testament, your surviving spouse or heirs will have to hire a probate attorney. That can cost $3,000 to tens of thousands for a larger estate. And believe it or not, many California attorneys have retired wealthy from handling one large probate, because they take a percentage of the value of the estate. The last time I checked, the average probate in the United States was taking 18 months. During that time the accounts and assets are locked up by the court. A probate is a horrendous process for surviving spouses and heirs. The Family Trust can be a good answer.
Buy Real Estate in a Family Trust
A revocable living trust allows you to completely avoid probate, attorneys, and all the delays and costs, provided the assets are titled in the name of the trust. There are some tax savings provisions in this kind of trust, but the bigger tax savings are built into irrevocable living trusts or other exotic estate planning tools for high net worth individuals. For a nice list of the kinds of trusts that can be used with explanations of their purpose, see Estate Planning Tools for Real Estate.
You Cannot Buy In The Name of the Family Trust
If you are buying your retirement home in Sequim or Port Angeles (or anywhere in the U.S. for that matter), and if you are going to apply for a loan, you will be required by the lender to make the loan application in your personal name, not the name of a trust. The real estate offer and the loan application must have the exact same buyer named. There are some exceptions, most notably if you are paying all cash, you can title the real estate any way you want.
Estate Planning for a Family Trust
Here’s the answer for estate planning purposes. Purchase your home in your personal name (or as husband and wife), and after closing transfer title into your Family Trust with a Quit Claim Deed. There is no transfer tax or excise tax when you do that. You will only have the cost of the preparation of the Quit Claim Deed from yourself to your trust, and the recording fee (about $11.00).
Since 70% of Americans do no estate planning at all, I strongly recommend that couples get this all done so your surviving spouse or heirs will not have to be stressed out with the costs and delays associated with a probate. I have met with many widows in Sequim whose husbands never completed any estate planning, and it causes so much stress and anxiety, not to mention financial chaos. A Family Trust is an excellent estate planning tool and a blessing for your spouse.
Possibly Related Posts:
- Buying a Home with a Revocable Trust
- Buying Real Estate and How to Hold Title
- Real Estate and Estate Planning and Death
- Real Estate and the Probate Process