Mid-Summer’s End of Year Planning – Part I of III
Probate & Limited Liability for Real Property
The frantic real estate boom in the Southwest and throughout the country has definitely fizzled out for the foreseeable future. The buying, selling and refinancing storm has calmed and most people are prepared to sit tight for a couple of years. That fact coupled with time seeming to fly by has left many of our clients with real property that is left out of their trust or LLC. While you may have already started planning your Thanksgiving and Christmas holidays, have you also taken a look to see if your real property is exposed?
Mitigating Exposure #1
The purpose of a living trust is to avoid probate for your family after death. It is not the responsibility of the closing/settlement agent to transfer your property into the trust after a purchase or refinance. It is up to you to make sure that this is done. Here’s a recent scenario which we see repeated over and over.
A client owns multiple properties, their primary, a vacation home, and some investment property. They refinanced one of the properties and through the escrow process the settlement agent transferred the property out of the trust to their individual name. The settlement agent follows the lender’s instructions that state that the loan and the title are both in the individual’s name and not the trust. The borrower, who was elderly, did not pay attention to the details and the other family members were not aware until it was too late that their parent never transferred the property back into the trust. As a result, that single property must go through probate which was not the original intent. It is best to seek clarification from a trained eye in Title and Escrow services if you have refinanced or purchased any real property and you have a living trust.
Mitigating Exposure #2
The purpose of an LLC for investment property is to limit the exposure between personal assets and business assets. Your primary home and your vacation home should be in your trust. Your investment property should be in an LLC. (Note – in the above case study, they were advised to keep their investment properties in their trust – our attorney does not usually recommend this.). Here is a recent example of this scenario.
A client had multiple investment properties held in their LLC. They had an opportunity to do a big rate reduction and over the course of several months, they refinanced all of their investment properties thereby increasing their revenue. They were so focused on the rate reduction they forgot to verify and transfer the ownership of the properties back into their LLC. Unfortunately, the client became incapacitated. Fortunately, the Health Care Directive they had allowed the attorney-in-fact to transfer the properties back into the LLC. In regard to probate, the trust was the Member of the LLC.
From a title perspective you always want to make sure that you have the ability to put your property on the market, i.e. buy or sell. By verifying that the ownership is in the correct entity, your property is marketable and you have the peace of mind knowing that “just in case” you don’t end up with exposure.
In closing, it’s your responsibility to oversee the titling (the ownership) of all your real property. Please also note that States have different probate laws. We are here to review the chain of title on your home in the Southwest and answer any questions you may have from a trained title perspective. The rest of this year will fly by, don’t leave this until you are too busy enjoying the holidays!
In the next article, we will address adding a spouse and/or other individual to the title of real property to avoid potential probate issues.
Quick Claim USA and its employees are not attorneys in the State of Nevada or in any other State or Jurisdiction. Quick Claim USA is not licensed to give legal advice and may not accept fees for giving legal advice. Should you have questions regarding any of the above items, you must seek the advice of independent legal/tax counsel of your choosing.
