Yahoo Life’s recent article entitled “Why You Should Put Your House in a Living Trust” explains some of the biggest errors people make with trusts. Beck & Lenox Estate Planning & Elder Law, LLC, does everything possible to emphasize the importance of following instructions we provide in order for our clients to avoid the common mistakes made with living trusts.
Remember that a trust is a fiduciary relationship in which one party (trustor) gives another party (trustee) the right to hold title to property or assets for the benefit of a third party (beneficiary).
Trusts are created for these reasons:
- To provide legal protection for the trustor’s assets
- To be certain that those assets are distributed according to the trustor’s wishes
- To save time and reduce paperwork; and
- In some instances, to avoid or reduce inheritance or estate taxes.
Also remember that although trusts are generally associated with the wealthy, they are highly versatile instruments that can be used for a variety of purposes to achieve specific goals.
Failing to retitle your home. If you don’t retitle your home or transfer the deed into the name of the trust, you paid a lot of money for a piece of paper. The trust is empty because it hasn’t been transferred. Therefore, it is not covered.
Failing to notify tenants of the ownership change. If you’re retitling a two- (or multi-) family home into the trust, and the property has rent-paying tenants, you need to inform them of this change in landlord for rent payment purposes. You’ll also need to set up a bank account in the name of the trust for rent deposits.
Failing to tell the insurance company of ownership change. Be sure to tell your home insurance company about retitling to a trust. If not, the insurance company may deny your claim in an event because the actual property owner—your trust—wasn’t insured.
Failing to tell the bank holding the mortgage of the intended transfer. Note: the Yahoo Life article is incorrect here, when it warns about triggering the “due on transfer” clause in your mortgage when transferring your owner-occupied primary residence to your revocable living trust. In reality, such transfers are protected from accelerating the mortgage by federal law, specifically the Garn-St. Germain Act of 1982.
Avoid these common mistakes made with living trusts by working with an experienced estate planning attorney like the ones at Beck & Lenox AND by following instructions provided! Lastly, remember, trusts are not just for wealthy people. If all you have is a house, you may benefit from having a trust in place.
Reference: Yahoo Life (Jan. 10, 2022) “Why You Should Put Your House in a Living Trust”