Creating the Best Estate Plan for a Family’s Home

Our homes are our most valuable assets – a plan to preserve and protect that investment should be well thought out. You’ll want to consider your circumstances and pick the best option for your family’s current situation and needs. Ultimately, you may not find a perfect option, but settling on a plan that fits your parents and family’s needs will put everyone in a better situation moving forward.

Consider All Options for Transferring a Family Home:

Here some legal options, from the guidance of Weisinger Law Firm, for your family to consider:

A Will

Pros:

• Wills are generally less expensive to set up than a revocable trust. Compared to trusts, wills are less expensive. For smaller estates, the cost of a trust might not make sense financially for your family.
• They are also less complex than trusts. you don’t have to worry about retitling any of your assets or the other formalities that come with holding your assets in a trust.
• Wills will cover all probate assets whether you know about them currently or not.  You do not have to track down account numbers and go to multiple banks to retitle those accounts.
• If you are skeptical that your assets would be distributed according to your wishes, using a will requires court supervision of your estate.

Cons:

• Wills become a matter of public record when they’re submitted to the court for probate. A list of your assets will be available to anyone who knows where to look.
• Wills do nothing to plan for mental disability because they do not go into effect until the testator dies. In the event of a parent or loved one’s mental incapacity, it would have to go through court, which is can be stressful and costly.

 

A Revocable Living Trust

A trust is simply an agreement between a Grantor, a Trustee, and a beneficiary.  The Grantor places property in a Trust. The Trustee acts as the manager for that property and the beneficiary benefits from the property in that trust.  In a revocable living trust, the same person typically holds all three positions initially. For example, if John Doe created a revocable trust for himself.  John would grant property to the trust as Grantor. John would then manage the property as Trustee for his own benefit. The benefit of this arrangement is that the Trust terminates on its own after John’s death meaning we don’t have to go to probate court to deal with any of the assets that have been placed in the Trust.

 

Pros:

• You avoid probate. Why subject your loved ones and your property to the restrictive rules of probate court when you can easily avoid it by funding a trust? A revocable living trust can also give your loved ones almost immediate access to cash during a difficult time.  Even in the simplest probate matters, it can take several weeks to get access to accounts, whereas property in a trust can be accessed almost immediately.
• Unlike wills that go through court, you keep things private with a trust. Probate is a public proceeding. Trust documents are never filed with a court so they don’t become a public record for everyone to see.
• Revocable living trusts can prepare an estate in the event you become mentally incapacitated, not just when a family member passes away.  To clarify, you can name a successor trustee to manage the trust for you should you become incapacitated.
• You Can Avoid Guardianship or Conservatorship Proceedings: Forming a revocable living trust involves naming a successor trustee, someone to step in and manage the trust for you if a time comes when you’re no longer able to do so yourself.

Cons:

• Upfront Costs can be expensive. It generally costs more in time and money to set up and fund a revocable living trust than to simply write a will. If your family can incur these costs, then it’s certainly a good option.
• Funding a Trust can be a time expense. You have to contact your bank, investment and insurance companies, and transfer agents. You have to change account and stock ownership and update beneficiaries. If the trust isn’t fully funded, it’s not worth the time, money, and effort to create one.  It is important that your financial advisor and estate planning attorney communicate with each other to ensure that all accounts are titled properly.
• You will still need a will called a pour-over will to “catch” your unfunded assets and “pour” them into your trust.

 

A Revocable Transfer On Death (TOD) Deed 

The transfer on death lets beneficiaries receive assets at the time of the person’s death without going through probate. With this option, you avoid probate on a property and it allows for a change the designation before a family member passes away. It’s a great idea, and although it’s not available in every state, it is available in the state of Texas. It is important to remember that the Transfer on Death Deed only applies to the property that is identified in the document.  Other properties would still cause a person to potentially need probate.

 

Pros:

• You avoid probate for the specific property listed on the deed.
• The Transfer on Death Deed likely defeats claims from creditors as it is a non-probate transfer.  They may also avoid Medicaid Estate Recovery Program (MERP) claims, although this is still to be determined.

Cons:

• If there are multiple beneficiaries all will take an equal share in the property.  If the beneficiaries do not get along, this can create a disaster.
• You will still need a will or trust to cover other assets.

 

Holding On To The House To Sell:

This could be an option if your parents move to an independent or assisted living home. When there’s nobody to take care of the home, the best thing to do may be to sell the home. There are some variables on how much money you’d be able to get, including, the local real estate market, the condition of the home, and even your parent’s readiness to sell the home. This can be accomplished regardless of which of the above choices you choose.

 

Consider these Factors in Your Decision:

Before Anything, Consult with Siblings

It’s important to get on the same page with siblings prior to discussing this topic with aging parents. A unified approach will help the actual conversation go smoothly.

 

Do Your Financial Homework

Understand how much it costs when deciding between will or trust and considers the value of the property, as well as other assets your parents have.

 

Plan a Family Meeting

Of course, it’s never an easy subject to broach, but nonetheless, it is a practical one. The best thing to do is to plan a family meeting in advance and make it clear you’ll be discussing family matters.

 

Focus on What Your Parents Want to Do

It’s important for adult children to understand what their parent’s wishes are so we don’t have to be guessing. After all, this is about what’s best for them – their wishes should certainly be a large factor in your decision.

 

Plan for Mental Incapacity, not Just Death

In the event a parent is not in a mental state to make a decision best for them, you’ll want to create an estate plan that accounts for this. One of the most important documents to help accomplish this is the Statutory Durable Power of Attorney.  This document will allow your parents to name an agent to make financial decisions and transactions on their behalf should they become incapacitated for any reason.