By Craig Panholzer, Esq. and Michael Salad, Esq.
June is National Homeownership Month, a time when many homeowners reflect on their property and estate planning needs. One of the most common assets considered in estate planning is a person’s home. Estate planning is the process of preparing for the management and distribution of an individual’s assets and liabilities during their lifetime and after death. However, there are many misconceptions surrounding real estate ownership within a revocable living trust.
A living trust, also known as an inter-vivos trust, is a legal document created during a person’s lifetime (as opposed to a testamentary trust, which takes effect after death through a will). A revocable living trust, which is the most common type of living trust that holds real estate, allows the person who establishes the trust (often referred to as the “grantor” or “settlor”) to modify or revoke the trust during their lifetime.
The Benefits of Transferring Real Estate into a Trust
Transferring real estate into a trust is a powerful estate planning strategy that offers homeowners significant benefits. One of the main advantages is the ability to avoid probate. Probate is the court-supervised process of administering an estate after a person’s death, ensuring that debts are paid and assets are distributed to beneficiaries. In many states, such as Florida and New York, probate may take months or even years to complete, often delaying the transfer of a home to the decedent’s heirs.
In cases where a person owns multiple properties across different counties or states, ancillary probate may be required. Ancillary probate is an additional probate proceeding in each jurisdiction where real estate is located. Ancillary probate may increase the cost and complexity of administering an estate. However, assets held within a living trust typically bypass probate, allowing for a smoother and faster transfer of property to beneficiaries. It is important that appropriate insurance coverage is obtained by the trust.
The Overlooked Issue of Timeshares
One aspect of estate planning that is often overlooked is the disposition of timeshares. Timeshares, which are usually deeded and recorded in jurisdictions outside a person’s primary residence, must be properly transferred to a trust to avoid probate complications. Failure to do so may necessitate ancillary probate, increasing the complexity and cost of settling an estate.
Privacy and Control
Another key advantage of using a trust is privacy. Unlike probate proceedings, which are public record, the details of a trust (including its contents and beneficiaries) generally remain private. This offers homeowners peace of mind, knowing that their estate matters will not become public knowledge.
Additionally, placing property in a trust provides better planning in the event of incapacity. In such cases, the successor trustee can manage the property without the need for court involvement in guardianship or conservatorship proceedings.
Conclusion
A trust generally offers homeowners greater control, peace of mind, and protection for their heirs. However, transferring real property into a trust is not a decision to be made lightly. It comes with legal implications that should be carefully considered. Homeowners are advised to work with an experienced estate planning attorney before transferring a home to a trust.
Craig Panholzer is an attorney in Cooper Levenson’s Business & Tax practice group in its Florida office. He concentrates his practice on business transactions, estate planning, special needs planning, probate and tax matters. Craig may be reached at (954) 889-1856 or via e-mail at cpanholzer@cooperlevenson.com.
Michael Salad is an attorney in Cooper Levenson’s Business & Tax practice group. He concentrates his practice on estate and asset protection planning, probate and trust administration, special needs planning, business transactions, mergers and acquisitions and tax matters. Michael holds an LL.M. in Estate Planning and Elder Law. Michael is licensed to practice law in Florida, New Jersey, New York, Pennsylvania, Maryland, Connecticut, Georgia, Massachusetts, Alabama, Arizona, Virginia and the District of Columbia. Michael may be reached at (954) 889-1850 or via e-mail at msalad@cooperlevenson.com.
The content of this post should not be construed as legal advice. You should consult a lawyer concerning your particular situation and any specific legal question you may have.