First things first — a quick review of the difference between a WILL and a TRUST, and how you got here – with a trust that owns your home.
Both wills and trusts are legal documents that outline how you want your assets used to take care of your family. While wills only take effect when you die, trusts go to work for you immediately.
Whatever assets you own in your own individual name when you die, that don’t have a joint owner or a named beneficiary, become part of your Probate Estate. A will tells the court system what to do with those assets, and your wishes are carried out through a process known as Probate. This can be a long process for your family, a minimum of a year, and may involve court dates, lawyers, time and money.
A trust, on the other hand, avoids nearly all that. Assets in a trust are readily accessible by a surviving spouse or key family members. A trust can streamline how you pass your assets to your children, and keep everything as simple as possible for everyone involved.
This is one reason you might choose to put your house(s) in a trust: ultimately to protect your spouse/children/grandchildren/beneficiaries from delays, probate costs, fees and complicated, costly processes.
A trust can also provide for continuity of residence if your children are still minors when they inherit. If a house in trust is passed to your kids, whomever you name as guardian can simply move in, and your children don’t have to be uprooted during such a traumatic time.
So, you’ve set up a trust because you want to keep things as simple as possible for your family, and allow your house to pass to your children upon your death without any delay.
Now that your trust owns your home, here are some things you should know:
While in general a trust allows for greater privacy than a will, when it comes to your home, some specific details about the trust WILL be on public record at the Registry of Deeds: your name, the trust name, the names of all trustees, and successor trustees. And the property address.
And as soon as that information gets recorded, you may get a letter titled something like “Recorded Deed Notice,” suggesting you need to pay ($80 or close to that) to get a hard copy of your deed and property assessment. DON’T. It’s a scam. We wrote about this awhile back. You can read more about that here.
You WILL want to file a new Declaration of Homestead. Now that your home is owned by your trust, the trust needs to declare that you live there. (If you did your planning with us, we took care of that for you already.) By declaring your homestead, you’re protecting up to $500,000 in equity from creditors and other lienholders. Not your mortgage though, and a few other special creditors are also exempt, such as tax liens, liens for Medicaid or those arising from unpaid alimony, child support or debts incurred by fraud.
You DON’T need to notify your mortgage company. Contrary to what some might tell you, putting your house in a trust does not violate your mortgage in any way. There’s a federal law called the Garn-St.Germain Act that makes it permissible to put your house in a trust for estate planning purposes without violating the “due-on-sale” clause of your mortgage.
You should, however, notify your insurance agent to let them know about the trust, and make sure they make any notations necessary on your homeowner’s policy. They’ll make an addendum to your policy which will close any loophole the insurance company could use in the event of a loss.
Want to know more about trusts and wills? There are advantages in setting up both. We can explain it in a way that makes sense, and takes into account your unique situation. Choose a time that works for you, and we’ll walk you through it. CLICK HERE to apply for your complimentary Strategy Session now.