For many homeowners, a family trust can play an important role in an estate plan. This becomes especially important when a family owns valuable real estate. A trust can help families organize their assets and plan for the future. It can also make transferring property to loved ones simpler after the trustor dies.
This subject is particularly meaningful to me right now because I am currently helping a friend establish her trust for her La Canada home. By “helping,” I mean I meet with her trust attorney and sit in on her meetings. I am there to provide support and help her understand the real estate aspects of the process. I am not acting as her attorney or providing legal advice. Instead, I am involved as a friend and real estate professional.
What Is a Family Trust?
A family trust allows you to place assets into a trust for the benefit of your chosen beneficiaries. Depending on the type of trust and how it is structured, it may help keep estate administration more private. It may also allow assets to pass outside of probate. This can be especially important for homeowners. A home is often one of the largest assets a family owns.
Benefits of a Family Trust
A properly prepared and funded trust can provide several benefits.
Avoid probate. Property held in a properly established trust generally can pass to beneficiaries without going through probate. This may save time and expenses.
Plan for your family. A trust lets you specify who receives your assets. You can also establish instructions for when and how beneficiaries receive them.
Manage real estate. A successor trustee can generally manage trust property after the trustor’s death. If the family decides to sell the home, the trustee can work with the appropriate professionals.
Plan for taxes. Certain trusts can play a role in estate and tax planning. However, the tax consequences vary. Therefore, homeowners should consult a qualified estate-planning attorney and tax professional.
Revocable or Irrevocable?
One important decision involves choosing the type of trust. A revocable living trust generally allows the person who created the trust to maintain control of the assets. The trust can usually be changed or revoked during that person’s lifetime.
An irrevocable trust works differently. It can involve giving up certain rights or control over assets. Therefore, choosing the right type of trust requires careful consideration. An estate-planning attorney can explain the differences and help determine what fits your circumstances.
Creating a Trust Is Only the First Step
Signing a trust does not automatically place all your assets into it. The trust must also be properly funded. For example, if you want your La Canada home to be owned by the trust, you generally need to transfer title into the trust. This usually involves preparing and recording the appropriate deed.
Other assets may require different steps. That is why working with an estate-planning attorney is so important. Planning can make that process much easier.
What Happens When a Homeowner Dies?
When someone dies and owns a home through a properly established trust, the successor trustee generally follows the trust’s instructions. If the family decides to sell the property, the trustee may work with an estate attorney, title company, escrow company, and a real estate agent familiar with La Canada trust sales.
The trustee also needs to provide the appropriate documentation showing their authority to act. Every trust is different. Therefore, the attorney and title company should confirm the requirements before the property goes on the market.
Plan for Your Family
A family trust can be an important part of an estate plan, particularly when real estate represents a significant portion of a family’s wealth. However, a trust is not a one-size-fits-all solution. Your family circumstances, assets, tax situation, and goals all matter.
For that reason, work with qualified legal and tax professionals when creating or updating your estate plan. As a La Canada real estate professional with extensive experience handling trust sales and inherited properties, I understand the unique challenges that can arise when a family needs to sell a home held in a trust.
I can help trustees and families navigate the real estate side of the process. This includes determining market value, preparing the property for sale, developing a marketing strategy, and coordinating with the professionals involved in the transaction.
Most importantly, don’t wait until your family is dealing with a crisis to find out how your real estate is titled. Planning can save your loved one’s time, stress, and unnecessary complications.
