One of the biggest advantages of putting property into a trust is that the trust avoids probate when you die. Other advantages include protecting the property from creditors, and saving estate taxes on the property when you die.
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When property is held in trust it is no longer owned by you personally. In some states, the trust owns the property, and in other states, the trustee owns the property on behalf of the trust. Either way, you do not personally own the property.
When you die, all of your property is catalogued and organised, and this collection of property is referred to as your probate estate. Probate is the proceeding in court where a judge distributes your probate estate according to your will, if you have one, or state law if you don't have a will. If you place your home in a trust before you die then the home is not included in your estate, which means your home does not have to go through probate. This is good news for your family, friends and heirs because probate is often a long, annoying and expensive process.
Save Estate Taxes
If you own enough property when you die, then your estate may be taxed by the federal government. This is referred to as an estate tax. Some states also impose a death tax, which works the same way. Again, because a home in trust is not owned by you personally, the home is not a part of your estate when you die and this, again, it is good news for your family, friends and heirs.
If you owe money on debts, your creditors can enforce those debts by seizing and selling your assets. In most states, this includes your home. But if you put your home into an irrevocable trust where you no longer own the home, your personal creditors cannot touch the home.
Most married couples own their homes together as "joint tenants." This is a legal term that means if either of you die, the other person automatically owns the entire home without having to go through probate or pay estate taxes. However, what happens if you and your spouse are in a car accident and you die at the same time? If you don't have your home in a trust, your home ends up in your estates and has to go through probate and possibly, estate taxes will have to be paid on it--which is bad news for your children. But if you put the home in a trust, you can plan ahead for this unfortunate event by explaining in the trust document what happens to the home if you and your spouse die at the same time.
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