Get familiar with Transferring property Into a Living Trust.
Phase II – Transferring Title
This is the second part of a three-part series on changing the title of real property. In Phase I, we discussed adding a name on the title and we were referencing a situation where a couple is getting married and adding the spouse.
For Phase II, quite a bit of time as passed by and the family has grown with children and professionally. Our couple may now be facing issues with their parents dealing with poor health or death. They begin to research and talk to others about protecting their assets from probate. They have started thinking about estate planning. Let’s review three scenarios regarding estate planning and the transfer of property.
Transferring a primary home and/or a vacation home into a living trust.
Transferring investment property into a Limited Liability Company (LLC)
Transferring property that may be occupied by their children into the children’s names
Transfer upon death
In scenario number 1, the couple owns both their home and their vacation home and in order for it to stay in the family in case something happens to them, they want to transfer it into a living trust. The reason for doing this is that the properties would pass to the family without incurring the financial, emotional, and mental hardship of probate. The benefit of the living trust is that whomever the couple identifies as their successor(s) and beneficiaries, they can immediately make decisions. Probate will delay their ability to have control of the property(ies). Most people wait until their children are adults before they begin estate planning, however, a living trust can be created at any time, even before you are married. In fact, it is beneficial to do it sooner than later and have it be done. A living trust is a living document and can always be amended.
Scenario 2, deals specifically with investment property aka rental, or non-owner occupied real estate. The property that is owned is for business and investment purposes rather than personal use and enjoyment. Why put a property in an LLC? The reason most people are advised by their tax professional or attorney or both is as the name states, to limit the liability or exposure for tax and legal reasons. Please seek advice from your independent legal/tax counsel regarding any questions you have prior to making any changes.
In scenario 3, our couple may have assisted one or more of their children in purchasing a home and now wish to gift that interest to them. The transfer of ownership from parents to children happens all the time. If the home is free of a mortgage, and the children were added on the title after the purchase, a good strategy would be to contact the title company and request an endorsement to the title policy. Think about when your teenager started driving and you added them on to your auto insurance policy, the insurance company did an endorsement to your existing policy so that your children were covered when driving your cars.
If the children were not added on the title after the initial purchase and you want to simply gift the home to them and remove yourselves, then a new title insurance policy should be acquired protecting the ownership of the property. An example of this is when you buy a new car, it includes the manufacturer’s warranty and in most cases, people add an extended warranty. When you transfer the title of that car and remove yourself, the extended warranty does not pass along to the new owners.
If there is a mortgage, first add your children on to the title, and then through the refinance, the title and escrow company will issue a new title policy in your children’s names.
Often times, parents will ask if it’s possible to avoid probate for their children without gifting them the property until after their death? In previous articles, we have discussed the Beneficiary Deed. In this article, we specifically discuss how parents can maintain control of their property during their lives and how their children will avoid the probate process after their death.
In closing Phase II, there are many other scenarios that we haven’t addressed that may be more specific to your situation. For example, you may be a step-parent, you may not have children or you may want the property to go to your grandchildren or other family members for a variety of different reasons. In order for us to be able to go over your unique scenario, please contact us. Deed@QuickClaimUSA.com 702.233.4014 or Chat with us online at https://quickclaimusa.com/
In Phase III, we will be addressing removing a name from the title.
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