Part of being a responsible homeowner is having a proper estate plan in place. After all, considering the home is generally the largest asset most people own, it's prudent to ensure this asset is passed to the people you wish to leave it to.
Just like you protect your finances from debt or use home security to protect your belongings, estate planning with a revocable living trust can be a way to provide your loved ones with a legacy and inheritance, says Yahoo Life's recent article entitled “Why You Should Put Your House in a Living Trust.”
It's important to know what will happen to your house if you and/or a co-owner were to die. Even if your will gives your house to your children, the transfer can be delayed due to the rules of probate law. If you're in an LGBTQ+ family or have special needs, there are also frequently special circumstances to consider and for which to plan when crafting your estate plan.
Similar to a will, a living trust is a legal document that can be a vital tool for planning and distributing your assets to your heirs. A living trust is active when it's created and assigns a trustee to manage certain assets—such as your house—on behalf of the future beneficiary.
A trust can be either revocable or irrevocable. Revocable means you can modify the terms of control of the assets in the trust at any time. While this gives you flexibility, the trust assets will count as part of your estate when you die. An irrevocable trust allows your assets to no longer be counted as part of your estate. However, you have little control of the trust and the assets in it. The type of trust you use depends on your circumstances.
A will only becomes active after you die and must undergo probate. Trusts don't need to go through probate and can't be contested.
If you're worried about leaving assets to young children or family members who aren't good with money, you can structure your trust so that a responsible third party will manage the trust assets responsibly.
Depending on the type of trust you create, you can give protection creditor protection or protection in the event of a divorce. You can also place restrictions on the sale of your home—at least for a period of time.
Note that state laws differ on what creditor protection is available to a homeowner as to their home. Some states protect the debtor's home from creditors outright, and some allow a home to be protected from creditors if the debtor's home is titled with a spouse (the spouse's name is also on the home's title) and the spouse is alive after the debtor's death.
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Reference: Yahoo Life (Jan. 10, 2022) “Why You Should Put Your House in a Living Trust”