Land will presumably last forever. Luckily, none of us will. Therefore, we should never have something permanent like land (and the building attached to it) titled to us as individuals. Instead, we should have it titled to something that is permanent like a corporation or a living trust. Here are the top five reasons why.
Reason #1: Putting the House in a Trust Avoids Probate
You named a beneficiary for your life insurance and your retirement plans (i.e. 401(k) and IRA) but who is named as the beneficiary for your house? It's sounds crazy but one of your most valuable assets doesn't have a named a beneficiary for it! Even a house in joint name between a husband and wife doesn't have a beneficiary (if they both die together). The bad result is the house passes to the estate and then the family needs to go through the probate process (or at least purchase a bond in lieu of probate) to get the house out of the estate so that they can sell it. The simple solution here is to transfer the title to the house into a revocable living trust. The trust will clearly name beneficiaries and a successor trustee which will keep the house out of probate and save your family thousands of dollars.
Reason #2: The Trust Protects You During Periods of Incapacitation
Let's face it, we hope it doesn't happen but there is always a chance that we can become incapacitated tomorrow. Therefore, we need to plan need to plan ahead today. Not only does putting assets in a trust avoid probate, it also prevents needing an adult guardianship hearing if you are ever incapacitated. This is accomplished using a variety of documents, one of which is the revocable living trust. The other documents include a medical power of attorney, a financial power of attorney, and a living will (in some situations). If you become incapacitated and your house is in a trust, then your family can come together and make a decision to sell it or not based on what they think is best. The result is again thousands of dollars in savings from not needing to go to court and have an adult guardianship established. Between the trust and the powers of attorney, your family will be able to do whatever is in your best interest.
Reason #3: The Trust Can Provide for your Children and Grandchildren
Estate planning is something we do for other people, not ourselves. It is possibly the most unselfish thing we will ever do. A lot of times the beneficiaries of the estate plan will be our own young children or grandchildren. If that is the case, having your house titled to a revocable living trust could be the best decision you ever made. The reason being is that if any of your beneficiaries are young or immature then you can hold the money in a trust for their benefit. This way, they can have access to the money for legitimate needs like education, housing and health care. However, this requires the naming of a successor trustee to oversee the money and make sure the terms of the trust are carried out. The alternative is that the beneficiary get the money outright (a/k/a no strings attached) at the age of 18 or 21 and no one wants that. The much better option is to title the house to a revocable living trust. The trust can also be the beneficiary (primary or contingent) for your life insurance and retirement plans. This way, all of these valuable assets can be used to help support your young beneficiaries but they don't have outright access to the money (a/k/a an ATM card).
Reason #4: A Trust Can Help Reduce or Eliminate the Estate Tax
Most Americans are not subject to the estate tax. The reason being is that there are both State and Federal exemptions that eliminate the tax for most people. For those select few that have net worth in excesses of the exemption amount, you need to plan ahead and do some simple estate planning. Step one is creating trusts for you and each member of your family. This way you can start to spread out the wealth among several close family members. The benefit of the trust is that you can get the asset(s) out of your gross estate and into someone else's (a spouse or child) but still maintain control. This way you get the best of both worlds. You can reduce your estate tax but still maintain some element of control over the assets until you die.
Reason #5: A Trust the Best Way to Ensure Your Wishes are Carried Out
A will has an executor, a trust has a trustee. Executors are overseen by a probate judge, whereas trustees are free to act depending upon the needs of the beneficiaries. Most people have people in their lives that they trust to carry out their wished if they die. These people include a surviving spouse, children, parents, siblings, and friends. If that is the case, it would be much better for everyone if you put your assets in a revocable living trust and name someone you trust as your successor trustee. This way he or she can do what is best for you and your family. This way your wishes are truly carried out. Otherwise, if assets go to the estate and an executor is named, the probate judge will strictly enforce the terms of the will or the state's intestacy laws and that may not necessarily be what you want.