Do you really need a living trust if you own a house?
People ask me all the time what the difference is between a will and a trust, and which one they should get. The answer is simple. If you own a house, you should have a trust. If you do not own a house, and you only have money in the bank and a retirement account, you might be able to get away with a will.
Here is why owning real estate changes everything, and what a trust does for you and your family.
Benefit 1: Your Family Avoids the Nightmare of Probate Court
If you own real estate and it is not in a trust when you pass away, that property goes to probate. It does not matter where you live in the country. Unless the home is worth very little and falls under your state’s probate limit, it goes to court. And for most of us, a house is worth hundreds of thousands of dollars. Sometimes millions.
So what is so bad about probate?
Probate is a court process. Say you pass away and you have two children. Even though you wanted them to have the house, they cannot simply receive it. They have to go through a legal process in court first.
The first problem is time. When real estate is involved, probate takes one to two years at a minimum. If your children do not hire a lawyer to handle it, they can make mistakes in their filings and have their hearing dates pushed back by months. That is how a case turns into two years, then three, sometimes five.
A man once called me and said his parents had left him their house. He was stuck in the probate system and could not get out. I asked him how long he had been trying. He said four years. Four years where he could not move on with his life, and where every memory of his parents was tied to a court case instead of a gift.
The second problem is everything else. The headache. The emotional damage. The time off work. Not knowing what will happen next, because you are at the mercy of the system and at the mercy of a judge. Meanwhile the house might be forced into a sale for pennies on the dollar. Or it might just sit there, stuck in probate for years.
If your children wanted to sell the house and use that money for college, or health care, or food and shelter and clothing, they cannot. Not until the whole process ends.
As a homeowner, one of your duties is to make sure the people you want to receive your assets can actually receive them, without going through the mess of probate court.
Benefit 2: You Keep More Money in the Family
Probate does not just cost time. It costs money, and your family pays it before they ever touch the property.
In California, the cost of probate is set based on the market value of the home. If your house is worth $700,000, the cost of probate runs into the tens of thousands of dollars.
Think about what that money could have done instead. It could have paid for your grandchildren’s college. Their health care. Their food, shelter, and clothing. Instead it goes to strangers. To attorneys and court fees.
A trust lets you keep that money in the family. When you pass away, everything stays private and stays outside the court system. Your children can hire a private attorney for a fraction of what a probate attorney costs to transfer title to themselves. Some families can even handle it on their own. Either way, the property gets into their names much sooner.
Benefit 3: Your House Goes to the People You Want to Have It
Your trust makes it clear who gets the house, so there are no arguments.
If you have three children and you want them to share it equally, your trust says exactly that. If you want to treat them unequally, you can do that too. Maybe one of your children has been taking care of you for years and you want to give that child more. Your trust can say 80 percent to one child and 20 percent to the other.
If your trust is done correctly, those wishes are honored. It becomes very difficult for a child to step in later and demand an equal share. Just tell your children while you are alive so they are not shocked after you are gone.
Here is a situation most people never think about.
Say you and one of your adult children pass away together in a car accident. It is unlikely, but it is not uncommon. Your child was grown, married, with children of his own. He was supposed to receive the house.
What happens to his share now? Does it go to your grandchildren? To his wife? To someone else?
Without a trust, you do not get to decide, and that uncertainty is exactly what you want to avoid. Spell it out. Say who gets the house, and say where that share goes if the person you named passes away first. Most parents want it to stay in the family and go to their grandchildren. Your trust needs to say so clearly.
Benefit 4: A Trust Protects Your Privacy
When your house ends up in probate, the whole process is public.
Your family has to disclose everything you owned that is going through probate. That includes your house and your money and exactly how much of it there is. Anyone can request that information. Anyone can sit in on the hearings.
I think every family has one nosy distant relative. If you do not want those people knowing what you have and who you are giving it to, you want a trust.
A trust is administered privately, outside of court. The only people who know what it says are the people you wanted to provide for.
Benefit 5: Someone You Trust Can Care for Your House If You Are Incapacitated
Incapacitated means you have dementia, or you are in a coma, or for some other physical or mental reason you can no longer manage your own assets. You are still alive. That is the key part of this scenario.
So who steps in? Who decides whether to refinance the house to pay for your care? Who decides whether it needs to be sold for your benefit?
Your trust can name a person you trust to take care of you. Without that, someone else will step in. It could be a problem child. It could be someone looking to take advantage of you.
Here is a story I hear all the time. A parent becomes disabled. One of their children gets the legal power to make decisions. That child sells the parent’s house, puts them in a nursing home, and pockets the money. If nobody finds out, they get away with it.
There is a problem relative in a lot of families. Naming someone you trust ahead of time is how you prevent fraud and financial elder abuse before it starts.
Bonus Benefit: Certainty and Peace of Mind
Here is one more benefit worth mentioning.
A trust gives you certainty. If something happens to you, your children are protected. Your spouse is protected. Everyone you wanted to care for is protected, and so are your assets.
That means you get to enjoy your life instead of worrying about the what ifs. If you have a vacation coming up, set up your trust before you go. Then you do not have to wonder what happens to your assets if you do not come back. Everything is already in order for your family.
Ready to Protect Your Home from Probate?
The best way to do this is with a lawyer. But I know some of you want to handle it yourself, and that is why I created a free class.
Take the free trust class. I walk you through how to make your own living trust the right way, so you can protect your house from probate with confidence. I show you how to make sure it is enforceable, how to sign it correctly, and how to transfer your assets into it so it actually avoids probate. There are many steps, and the class covers all of them, including the mistakes people commonly make when they do it without a lawyer. Register at freetrustclass.com.
Book a free phone consultation. If you would rather have it handled for you, talk with our team about a plan built around your family. Call us at (408) 412-1913 or visit treeoflife.legal.
Subscribe on YouTube. I post new videos every week on living trusts and how to do it yourself.
Whichever route you take, get it done. Your family should not inherit a court case.
Disclaimer: I am not your lawyer, and this article is not legal advice. It is information only. Reading it does not create an attorney-client relationship. If you have a legal question, please talk to a lawyer.
