If you are considering your options for when you pass away you may have put some consideration into how your property is handled. A trust, or a legal document that outlines how your property and assets are distributed after you pass away, may be your best option.
Compared to a will, putting your property in a trust offers several distinct advantages which you’ll learn about below. But before we dive into the four benefits of putting property in a trust let’s explain the two main types of trusts that exist.
Revocable & Irrevocable Trusts
Revocable, or living, trusts give you full access and ownership of the trust until you pass.
Irrevocable trusts, on the other hand, put a trustee in charge of the trust even while you are still alive. Another advantage to irrevocable trusts is that your property is removed from the value of your estate, saving money on taxes after death.
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This is just one benefit of having a trust in place, here are four others:
1. Avoid the Probate Process
If you put a trust in place in lieu of using a will, you can avoid probate. If you don’t put a trust in place and leave your property in a will, your family will have to go through the court-supervised process of distributing assets, paying taxes, paying bills, thus delaying the time in which your beneficiaries can claim your property.
2. Avoid Probate Fees
If you leave your property in a will, the above logistics will require legal counsel. This will add additional costs to your family and may result in the family having to pay up to 3% of your asset’s value in probate fees.
3. Avoid Public Record
If you’d prefer to keep the delegation of your assets private and free from public records, trust is the way to go. Probate is a public process and allows the will to become public records after your death. This means disputing family members may be able to see who got what and cause inheritance issues.
4. No Delays in Property Transference
Probate is often a lengthy process that has to be wrapped before assets are transferred. Alternatively, a trust will allow your beneficiaries to receive their property immediately upon your passing. They can also sell the property immediately if they choose to do so.
Cons of a Trust
Of course, anything that has this many benefits also has a few negatives you should be aware of.
For starters, setting up a trust is a much more involved process, resulting in additional upfront attorneys fees. Expect the fees to increase the more properties you have to transfer.
Other logistics will have to be factored in as well, including the retitling of assets for the trust to ensure they’ll be inherited as intended. For example, your homeowner’s insurance may need to be updated, as will any other related service-based companies that are connected to your name.
Finally, sometimes a trust alone will not cover all the assets of the deceased so a will may still be necessary. This is why it is important to consult with an attorney or financial planner to determine how your estate will be handled once you pass.