Real Estate in Trust
Real Estate into Trust for your Estate
Today we’re gonna talk about transferring real property, real estate like your home, that you’re living in your rental house or your vacation house, into the name of your trust and why it is so absolutely important that you make certain all of your real estate is in the name of your trust for it to work properly.
Let’s jump right in. If you go into your estate plan attorneys office and they prepare a revocable living trust centered estate plan for you, then you already have a trust. Whether it’s done by us or somebody else, and you probably have real estate most likely a house, a rental property, a vacation home and now you need to put it in the name of the trust.
So how do we do it? Well, the first way is actually pretty quick and it’s really pretty easy. We just do it with a quick claim deed. What we do is we just have you sign the property from your name, so let’s say your name is Enrique Smith. We haven’t changed from Enrique Smith to Enrique Smith trustee of the Enrique Smith revocable living trust. That’s it, that’s how simple it is.
The other way we can do it is with a warranty deed. And this is just because sometimes people have acquired the property from somebody else and they’re not sure if they have absolutely clean title.
So if that’s the case, we’ll actually go to a title company and have them prepare a warranty deed with a title search to make certain that the deed is completely clean and we transfer it that way into the trust. That’s just to make sure you have a clean title.
If you’ve recently purchased your house, or even if you purchased a few years ago, and you’re the only person in between when you bought it and now and it closed at a title company, then usually a quick claim deed is all we need to do to make sure that your real estate is transferred from your name into the name of the trust.
We do this with the house that you live in, with your real estate investments like some people have rental homes or apartment buildings whatever it is, we make certain that that real estate is in the name of the trust. I will say that sometimes people will have a property a vacation home in another state. In a way, it’s like a backup option that they keep in case they want to enjoy their vacation or celebrate life’s important moments.
And if that’s the case, like somebody has a vacation home in Florida or a vacation home in California or maybe even up in Boston, then what we’ll do is we will contact somebody in that state in the county or the district where that property is located.
Then have them execute the proper deeds to transfer the property from Enrique Smith to Enrique Smith trustee of the Enrique Smith revocable living trust.
And that’s really important because if we don’t get the real estate into the name of their trust, then it will have to be probated. And that is an especially important if you have property out of state to make certain it is part of your estate plan.
We have recently done several probates where people had a home here in Oklahoma or maybe it’s middle or interest. They had a vacation home out in California, and then for some reason they had another little rental property in Texas. We actually had to have probates in each of those separate states so that we can get the property transferred to the heirs that they were supposed to go to.
If they had had a revocable living trust what we could have done ahead of time before their loved one had passed away, is to simply then deeds in each one of those states, Texas, California, and Oklahoma, all putting the property into the name of the trust. Then when they passed away all we would have had to do is execute the proper deeds from the successor trustee to whoever the new heirs were pursuant to the language in the revocable living trust.
You see how much easier that is. And actually guys so much cheaper. We had to spend in that, in that case all about us but the client did had to spend three, $4,000 in each of those separate states to get the property transferred because they actually had to do a probate in each of those states. If they had just had everything in a revocable living trust, then all they would have to have done is execute the proper deeds.
And it probably would have been maybe a couple hundred dollars per property in each of the states. So much cheaper and so much quicker because obviously signing a deed in somebody’s office is lot more easier than having to go to the courthouse, file a probate, have hearings, have publication, and do all the things that go on when you have a probate. So that is why it’s so important that if you have real estate, you need to make certain that it is in the name of your trust.
So what do you need to be concerned with if you put your property into the name of the trust? Well, there are a couple things. The first really is your homeowners insurance whether it’s your homeowners insurance on where you live or just your insurance, your liability insurance on your property, your rental properties or your vacation home, you need to make sure that you contact your insurance company and that they put the trust as also insured in case something were to happen.
Because technically the trust is now what owns the property, right? So you just have to call your insurance agent and let them know that you have irrevocable trust and you’ve transferred the property into the trust that they were insuring from your name into the name of the trust and they can usually just make a change over the phone or send you the proper forms so to effectuate that change. But make sure and contact your insurance agent so that it gets done right and that you do it at the time the property is transferred. That way if something were to happen, the insurance company can’t claim that it’s not covered.
The next thing you need to be concerned about when transferring it into your name is, your homestead exemption. And guys on this one, you just need to check with the county or parish, wherever you are in the country, on what happens if you transfer it from your name into your revocable trust whether or not that revokes your homestead exemption.
I will say in most counties, the answer is it does not but you really need to check, and it really just depends on the county, the parish and the state, wherever you’re living. Check where you are before you make that change to make that the county knows what you’re doing and they will transfer the property correctly and you’ll be able to keep your homestead exemption and make sure that that homestead exemption stays is in place.
So what happens if your real estate is not in the name of your trust and you pass away? Well, I’ve already kind of touched about it a little bit, but the bottom line is that property will probably have to be probated. Cost in your estate, possibly thousands of dollars to probate something that could have easily been transferred for maybe a couple hundred dollars if it had been put in the name of your trust. Let me give you some examples.
I just gave you the example of the property in Oklahoma, Texas, and California that ended up costing probably almost 10, $11,000 extra to the estate because they didn’t put those properties into the name of the trust we had to probate them in each individual state. Had it been in the name of the trust, we would have just done three separate deeds in each of those states they would have just gone to the same heir saving literally $10,000.
That’s really one of the biggest reasons is if you don’t put it in the name of your trust it is going to have to be probated. Well we see this come up a lot is let’s say that somebody comes into our office, as part of the revocable living trust centered estate plan, that we create for our clients, we make certain that we know all of their real estate and we transfer all of their real estate into the name of the trust as part of the process. So when they come in and have the signing ceremony to sign all of our documents including in that signing ceremony, in addition to the power of attorney, the trust, the healthcare power of attorney, advanced directives, all of those great documents that you need to have, we also have them execute deeds for each one of their real estate properties.
Now what happens is our client takes their estate planning book and goes home, and maybe five years later, maybe three years later 10 years, whatever it is, they decide to sell that house. And when they sell that house and they go out and they buy a new house, they forget to tell their title company that they have a trust and the property ends up being put into their personal names. And so when they do pass away we have a revocable living trust, that says how we should distribute their property, but we have a piece of real estate out there that’s not in the name of the trust.
So what we have to do, you guessed it, we probate that property three, four, five, $6,000, to have the probate to get that property titled in the name of the trust after they die, and then we can distribute it according to the terms of the trust. That’s the biggest scenario that we see after people signed the revocable living trust a centered estate plan in our office, they buy a new property and they don’t title that new property in the name of the trust.
That is why we want to meet with our clients at least once a year, to go over what’s happening in their life. Have there been any changes? Has there been new real estate? Have you sold a piece of real estate? Have you bought a piece of real estate? What’s happened in your life that would require us to update their estate plan?
Remember your revocable living trust centered estate plan is a living document and it should be updated as your life changes. And that goes the same with your real estate. Make sure that if you have a revocable living trust centered estate plan, that you meet with your estate planning attorney, at least once a year. I know I’ve thrown a lot at you today so that’s why we’ve prepared our free guide on estate planning.
I’ll put a link to it in the description below and in the comment section below that, so that you can download it and get started in the right direction. And to help you out even more, watch this video up here and this video up here. If you enjoy this video then guys please smash that subscribe button and click on the like button and also click on that little bell so you’ll get notified every time we post a new video. Have a great day and an awesome week, and as always, thanks for watching.
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Cortes Law Firm
5801 Broadway Extension Hwy Suite 110
Oklahoma City, OK, 73118
This article first appeared on the Cortes Law Firm blog. This is for informational purposes only. ALWAYS seek independent legal advise.