You should contact an estate lawyer practicing in your new state. The laws vary from state-to-state. I moved about two years ago, and recently discovered that what happens to my house (controlled by my estate, according to my living trust) upon death is hardwired in my new state vs more flexible in my previous state. Sorry for being so vague. PM me if you want details.
I would have had to redo the trust if I’d kept it, yes. Laws are different in every state, so you do need to find an estate attorney in the state you reside in…
If you don’t want to create a trust and are pretty sure you won’t be moving you could deed the property to yourselves for life, remainder to your children (specify them, don’t just say heirs). I think you could probably specify in the deed that the life tenant may terminate the remainder interest should they sell the house, but you ought to research that.
Is a trust really needed? I know that probate is expensive and to be avoided in some states (California?), but I thought that in NY state, one did not really need a trust, assuming the siblings all get along.
Can someone who knows more on this topic tell me why a trust is important? I am asking on behalf of my mother.
Thanks!
I’d like to avoid a trust too, mainly because it seems complicated and once things get complicated I can easily get lost.
Isn’t probate 8%? Do you pay that on the full value of the house/estate or just the “stepped up value” of the house? Stepped up value is what you sell the house for vs. what it was worth on the day of the death. So get those houses appraised soon after someone dies!
How much does it cost to form a trust? Are there ongoing costs or future costs? Are lawyers just selling us trusts so they get the money instead of the state?
My attorney says that it’s mostly a wash (trust vs. probate). They both have their pros & cons, and of course it may vary by state. My estate is pretty modest but does include some life insurance and less than 100k home equity.
When my youngest was underage, I just had a will but the will directed the establishment of a trust for her in the event of my death. So no expenses of setting up a trust that might not be needed.
I think one thing about probate is to make sure the kids (or whoever) inherit some cash accounts directly, so they have money available immediately. I also found out recently that it’s cumbersome if multiple people inherit a retirement account, so instead of having all my kids splitting all the accounts, I now have just a single beneficiary on each account, CD, etc.
For most things where a beneficiary can be designated, I have done so. But my house and car will go to the estate because to my mind, there was no other better or simpler solution. Can you even put a house into a trust if there’s a mortgage on it?
“Can you even put a house into a trust if there’s a mortgage on it?”
To my knowledge, yes. When the house is sold, the lender gets paid off in escrow like anyone else who has a recorded interest (eg second mortgage lender, judgment creditor, mechanic lien, etc). The buyer wants clear title.
There are pros and cons of trusts vs probate. If you have any out of state property, it’s easiest if you have a trust. If the trust is just for distributing assets, it can be dissolved once tax returns have been filed and assets disbursed. If it’s for protection of creditors, it has to remain in place with one or more trustee and have a separate tax return filed for it for its duration. Any undistributed income of the trust is taxed at trust rates which our CPA said were higher than our individual rate (we always made sure it was all distributed).
If you have out of state properties, in which state do you set up the trust?
One husband. One kid. One house with a mortgage. One car with a loan. One ancient car without a loan. Random checking and savings accounts all joint with husband except for a small one that is joint with kid. Husband as primary beneficiary on IRA, kid as secondary. I’m primary on his IRA and 401k, kid is secondary. Last time I checked, intestate rules in MD send everything to a spouse, and then to the kid(s) if spouse is gone.
How long can I keep doing nothing about this?
The trust is set up where the person who is setting up the trust lives. In our case my SisIL lived in CA and had HI and CA properties. She set up her trust in CA, where she lived. It saved us all having to have probate and paying 10% of the value of everything as mandatory probate costs.
10% of the value of her share of the real estate was a lot of $$$.
Ok a few things.
One issue with a house and a living trust is if you refinance, you may need to take the house out of the trust, refinance, and then put it back into the trust. My mother had to do this a few times. So whether you want a trust may depend on your age, mortgage, and refi possibilities down the road.
Second, many states have simplified probate for small asset, no claims type of estates. So the “horrors” of probate may be overblown. You’ll need to check your state to make sure.
Third, if you really want to minimize aggravation for the kids, sell the house, turn it into cash, and rent. Cash is the easiest thing to split up. Getting rid of a house full of stuff is really a PIA.
Also, have your funeral home already picked out. I know it’s morbid. But in the event of an unexpected passing, it’s kind of tough for the kids to figure out where to send you. It’s something you never think about until it happens and in many cases you need to make a decision quickly. Opening up the yellow pages and throwing darts probably isn’t the best way.
I plan to sell the house in a few years (5-10). But you know, sometimes life (or death) intervenes.
Probably you are fine, unless you are very rich or a control freak. It’s still a good idea to have a list your DH and kid know where to find of all accounts and life insurance policies and safe deposit boxes. They don’t need your logon or passwords, as it would be illegal to log in as you after your death. State laws will be your default ‘will.’ If there are particular family keepsakes you want your kid to have you might want to list those as well.
If you are a rich control freak, you will want to make sure your IRA goes into a trust that your DH can use in his lifetime, but will pass to your kid at his death. That will keep it from going to his new wife and her kids if you die tomorrow and he remarries.
Also you want to keep it in trust so if your kid is a flamboyantly rich bon vivant and gets sued for something egregious or gets divorced from a money-grubbing floozy, the money in the trust won’t be available to the claimant.
I think estate planning, even if you don’t have a sizable estate, is one area where an abundance of caution is in order. I would use an attorney; he/she can advise you on the best way to go forward.
Regarding inheriting retirement accounts: just went through this with my Mom’s IRA. There are specific rules for how to handle the transfer. Google, and find one of the known financial experts’ articles on it. Except for a bit of a hassle with the bank (different answers from different staff, information extracted only by sharing info with co-beneficiaries, and telling us one thing and then changing and doing something else), we were able to have the money transferred within about 6 weeks of notification. At a different financial institution, of course. Watch the fees in this process, whether or not you share the account proceeds.
@MomofJandL please look into the tax considerations of your IRA, or other tax advantaged account going directly to a Trust. I believe there are tax consequences of it not passing to an individual. Or tax benefits lost.
I do not intend to leave an IRA to a trust. If I did, I would look into that. And yes, you have to consider the costs and restrictions of a trust as well as the potential benefits. Some trust forms let you keep or extend the life expectancy stretch, some do not.
Please go speak with a local attorney. Re difficulty of probate in NY, it depends on what county you are in; some of the counties are significantly understaffed and probate can take 6 months for a straight-forward estate, others it takes 2 weeks. And the idea of doing a Will yourself with on-line forms is crazy to me: there are very specific requirements for how a Will is signed and witnessed and if done incorrectly the Will isn’t valid.
After my father died, my mom had the house deed transferred just to herself (it was joint) and she added a “Transfer on Death” to the deed, naming an heir. This is in Minnesota and was done with the help of her estate attorney. With any luck, her estate won’t go to probate, which isn’t the worst thing in the world, but estate attorneys love it because they make money when that happens on all the paperwork and proceedings. At least that has been my experience as the representative of my dad’s estate.