Many people believe a trust is only a vehicle for the ultrarich, but that’s not necessarily the case. There are three main reasons that having a trust makes sense if you own a house.
1. Estate Taxes: If you live in a state like Massachusetts with a $1 million estate tax exemption, owning a home makes most couples prime candidates for a trust. With the $1 million exemption even an average priced house in Massachusetts uses up a large percentage of the exemption. According to Zillow, the average home price in Lynnfield, MA is $667,600.
2. Avoid Probate: The assets in the trust avoid probate, which is defined as the official proving of a wall. Probate is a public process that involves the court system. The whole ordeal is public and at times can be messy. A deceased individual’s estate could stay open for nine months to a year if any or all of the assets have to go through the probate process. Putting your house in a trust will save your loved ones from the hefty fee of probate costs, which can be as much as 3% of your asset’s value. This also means your loved ones will be responsible for finding attorneys and spending time going back in forth to court dates.
When you set up a trust you work directly will an attorney during the estate planning process and everything will be handled before you pass on. And in the distant future when the time does come, your family will be taken care of without spending extra time and money to deal with the probate court. The last thing most grieving family members want to deal with right after a loved one passes is having the assets of their relative scrutinized in such a public way. A trust avoids both the physical and emotional toll of probate.
3. Control: Unlike a will where a person just specifies who gets what at the time of death, a trust allows a person to discuss not only who gets what, but when. For example, if you have young children you may not want them to have access to all the proceeds from your house if something were to happen to you in the near term. You could specify in the estate terms a schedule or procedure of when the money is paid out. Creditors also do not have access to these funds. As a bonus benefit, the trust may allow assets to be protected from divorce. For example, if the house in a trust is left to the couple’s only child and the child were later to get divorced, the child may not have to share the proceeds with their ex.
If you own a home a trust is something you should investigate. Being prepared and having your affairs in order today beats leaving your loved ones with the challenge of figuring out what is supposed to happen with your assets tomorrow. For most people, peace of mind is paramount, and a trust provide a unique opportunity to achieve that goal. Our estate planning team would be happy to answer any questions you may have about trusts. Contact us today.
Written by Eric Sachetta.