Is It Best to Own Your Home in a Trust?
Transcript:
Jordan: Hi, I'm Jordan Flake. I'm an attorney with Clear Counsel Law Group. I'll often get the phone call from someone who just purchased a home, and they'll say, "Hey, I just purchased a home and my real estate agent said something about a trust. Do I need to own my home in a trust?" The answer to that question is what are you trying to accomplish with the purchase of this property. There can be a lot of different reasons why you buy a home, and a lot of different things to take into consideration.
In Nevada, if you own a home in your own name and then you pass away, that home just continues to stay in your own name until a court has come along and said this is what is going to happen with this property. They do that by way of a court order that gets recorded in the county where the property is sitting. Obtaining that court order is the probate process. That will trigger, in a lot of the viewers' minds, correctly trigger, this image of something that's a little bit of a time consuming, potentially expensive court process that can lead to a lot of problems and difficulties. When somebody asks me if they need a trust for their home, then usually I explain what this probate process entails and how to avoid it. The way to avoid having to go through the probate process is to put the property into a trust.
A trust operates like a box, and everything that's placed into that trust will not need to be probated when the individual passes away. That's the advantage of owning real property in a trust. There can be a lot of different ways to hold real property. If you own the property as a rental, you may wish to consider using an LLC, which is a business, to own the property. It's really just a case by case basis. I'd love to sit down with you and go over what you're trying to accomplish so that we can make sure that we use the right estate planning instrument for your objectives. Brian does that cover the question or was there any follow-up on that?
Brian: That covered the question very well. One follow up, though. Could you explain how the probate process gets expensive?
Jordan: The reason the probate process gets expensive is because the ... The word probate just means to prove or to try. The thing that the court is trying to prove or try is that the people who have come to the court saying, "Hey, my mom and dad passed away. We're entitled to these assets," the court kind of ... you can think of it like the judge leaning back in his chair and saying, "Really, are you really entitled to this? Prove it." Basically, the probate process is saying prove to us that you deserve the deceased individual's property. That gets expensive because that requires an attorney to come to court. It requires the appointment of a personal representative. It requires that we publicly announce the probate to allow competing claims to have an opportunity to come into court. There's certain time frames involved with probate.
It just gets costly and time consuming. That is part of why people should seriously consider doing a trust, is because a trust is an estate planning instrument that will allow you to avoid the probate process entirely. Other questions on this, Brian?
Brian: You said that a trust is good for real property. Will a trust help me plan for property that isn't real property?
Jordan: Yes, absolutely. Take a bank account, for example. The same scenario exists if it's just in the name of client Bob Jones and Bob Jones passes away and he has a bank account at Wells Fargo that has $40,000 in it. Bob Jones' children might go to the bank and say, "Well he was our father. We think that we are entitled to this." The bank will say, "That's all very well and good. However, we need a court order allowing us to release these funds to you." Obtaining that court order is the probate process. That's what we're trying to avoid. What Bob Jones could have done instead is go to his bank account and list the Bob Jones Trust as the paid-on-death beneficiary, and that would have gone into the trust, and therefore avoided probate. If you have any questions about that, feel free to give us a call at Clear Counsel Law Group. Thanks.
