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best way to own real estate in estate planning

What is the best way to own real estate?

Do you own real estate? Is it your home? A vacation home? Or rental property? It’s important to pay special attention to how you own your real estate. Here we take a look at the different types of real estate and information about the best form of ownership. This is important when you’re thinking about estate planning and asset protection.

Your Home

Because your primary residence (your homestead) receives special tax treatment, be very careful with how you own your home. In states like Florida, tenancy by the entirety offers married couples creditor protection. This protection is from the creditors of one of the spouses while still preserving relevant tax benefits. It also allows automatic transfer of ownership to the surviving spouse upon the death of the first spouse without court involvement. Transferring ownership of the primary residence to a joint revocable trust may also be an option if you live in a state that allows the tenancy of the entirety protection to transfer to the joint revocable trust. Ownership by the trust also means that the real estate will pass through the trust document instead of the probate process.

If you are single, owning the property in your name allows you to take advantage of tax benefits for primary residences. Transferring ownership to a revocable living trust may also allow you to retain the applicable tax benefits with the added benefit of avoiding the probate process. If you are worried about asset protection, certain types of irrevocable trusts can help. But those may require you to give up some control of the property.

The bankruptcy code may provide more protections for a primary residence (e.g., your state may have a homestead exemption). However, in some states, transferring your primary residence to a trust may eliminate the homestead exemption because the trust rather than you (the debtor) will be deemed to be the owner of the residence. If this situation could apply to you, it is important that you meet with a knowledgeable estate planning attorney before transferring your primary residence to a trust.

Vacation Home

For some families, their vacation home has not only high monetary value but also significant emotional value. Ownership of a vacation home by a trust or limited liability company (LLC) can be advantageous because it addresses two main priorities: ease of transfer to the next generation and asset protection.

With a trust or LLC, you are able to establish rules for how the property is to be used and maintained, as well as designate what is to happen to the vacation home once you pass away. This can be a great solution if you want to ensure that the vacation home stays in the family for generations with minimal family conflicts.

An additional benefit of having an LLC own your vacation home is that it provides limited liability from outside claims. If you get a judgment against your LLC, the creditor is limited to the accounts or property owned by the LLC to satisfy the creditor’s claims. Therefore, the judgment creditor cannot look to your personal accounts or property or those of the other members. Also, if a judgment is entered against you or another member for a claim unrelated to the LLC, it will be harder for a creditor to force a sale of the vacation home. This can be incredibly helpful if you wish to pass the vacation home on to the next generation without worrying about the individual financial situation of each new member.

Watch out for Single-Member LLC’s in Florida!

In some states, like Florida, a single-member LLC (an LLC in which you are the only member) does not enjoy the same protection from your personal creditors. The rationale of these laws is that your creditors should be able to seek relief through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by seizure of money and property owned by the LLC.

If the vacation home has been in the family for many years, it is important to consult with us and your tax advisor to make sure that transferring your vacation home to a trust or LLC will not cause an increase in your property taxes or other unintended consequences.

Rental Property

Because rental property is an income stream rather than a residence, asset protection is usually the primary concern. Rental property owners are at a higher risks for law suits. That is because the occupants can change over time. Transferring ownership of the rental property to an LLC is a great option. If a renter gets hurt on the property, sues the LLC and gets a judgment that exceeds any property insurance you have, the renter can seek satisfaction of any claims only from the accounts and property owned by the LLC, not from your personal accounts and property or those of any other owners of the LLC.

In addition, ownership by the LLC may protect the rental property from your personal creditors. However, if you are forming a single-member LLC, it is important to have us check state law to make sure creditor protection is available.

Call us today! (813) 902-3189

Regardless of what type of real estate you own, we are here to help you.  Call us to schedule an Estate Planning Session! Let’s discuss your current and future real estate ventures and the best way to protect them.

Want to learn more about us before scheduling your Estate Planning Session? Schedule a free 15-minute telephone consultation or send us a message. 

revocable living trust avoid probate

How do you know if you need a Will or Trust?

Do you need a Will (Last Will and Testament) or Revocable Living Trust? How do you choose?

Are you interested in a will or revocable living trust? Wills and trusts are useful estate planning tools. They serve different purposes and can even work really well together. First, let’s go over key differences between wills and trusts.

Will characteristics:

  • A will goes into effect only after you die.
  • It only covers property that is in your name at your death.
  • A will passes through a court process called Probate. The Probate court oversees the will’s administration and ensures the will is valid and that the property gets distributed the way the deceased wanted.
  • Because a will passes through Probate, it’s a public record.
  • A will lets you name a guardian for your minor children.

There is a good chance that if you care about how beneficiaries use what you’re leaving them or want someone else to manage it, you’re going to need some type of trust.

The two main types of trusts are testamentary trusts and revocable living trusts. One type of trust is inside your will and the other type of trust is a stand-alone document, called a trust agreement.

Testamentary trust characteristics:

  • A testamentary trust is a trust that you create through your will. A will is only “activated” after you die and after your will goes through Probate. Therefore, a testamentary trust only goes into effect after your death.
  • For our clients with young children who are using a will instead of a revocable living trust, we recommend a testamentary trust inside the will.  That is because children can’t inherit directly while they are minors. And even if they’re not minors, it’s not a good idea to let an 18-year old inherit a lot of money at once!  With a testamentary trust, your trustee (the person you trust to manage money for your children) can provide for your children’s healthcare, education, maintenance and support while your children are minors.
  • You can include provisions in your trust to allow your beneficiaries to inherit at ages and stages, all at once, or for the funds to stay in the trust for that beneficiary’s care and support.
  • Funds that go inside the testamentary trust first have to go through the Probate court process before they wind up inside the trust.
  • The will (and the testamentary trust that’s inside it) is filed with the Probate court.

Revocable living trust characteristics:

  • A revocable living trust is a trust that you create during your lifetime. It is  “revocable” because during your lifetime, you can make changes to it or even revoke it.
  • You can use a trust to manage property during your lifetime, at your death or afterwards.
  • A trust covers only property that you transfer into it during your lifetime, or after your death (via beneficiary designations).
  • Property that passes through your trust avoids the Probate court process.
  • The revocable living trust stays private because it’s not filed with the Probate court.
  • You can include provisions in your trust to allow your beneficiaries to inherit at ages and stages, all at once, or for the funds to stay in the trust for that beneficiary’s care and support.

So if you have a revocable living trust, do you still need a Will?

Yes, you still need a will, a pour-over will. That is generally a very streamlined will that basically “pours” everything that needs to go through Probate to your revocable living trust. We also call this a “just-in-case” will, in case there is property you forget to transfer to your revocable living trust.

Also, if you have minor children, you can use your pour-over will to legally  nominate guardians for your children, in case you and their other parent dies when they are minors.

OK so do you need a will, will with testamentary trust provisions or a revocable living trust?

It depends on different factors and on your priorities such as:

  • Do you want to maintain privacy for your beneficiaries?
  • What is your budget for estate planning? (A revocable living trust costs more to set up than a will).
  • Do you want to avoid Probate?
  • Do you prefer everyone to stay out of Probate court as much as possible?

We can help you sort this out so that you can have peace of mind.

Call us at (813) 902-3189. Schedule a valuable Planning Session at no cost to you.

Learn more about wills, trusts and guardianships here.

You can also learn more about revocable living trusts here.

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Why did Carrie Fisher’s Estate Plan fail?

Do you have a revocable living trust? Will your family have to go to court and lose their valuable privacy? Whether you own a little or a lot, you need to be careful with your revocable living trust.

Do you have a revocable living trust as part of your estate planning? A solid estate plan can mean the difference between an expensive time in court or a smooth transfer of property for your family. When a high-profile celebrity passes away, we can learn a lot about the value of careful planning. Let’s take a look at what trust funding is and why it’s important.

This failed estate plan is an excellent example of why you need properly transfer property to your revocable living trust.

In our opinion, Carrie Fisher’s plan failed, because it didn’t keep her assets out of court and they didn’t pass privately to her daughter. While Carrie Fisher had a revocable living trust, she didn’t transfer all of her assets to her trust.  That is why her Trustee had to file a petition in probate court seeking to have her assets transferred into her trust.

This actually happens a lot! We see clients all the time who come in with trusts from other lawyers. Unfortunately, many of those documents won’t work the way they were designed to. That’s because nobody took the time to inventory the assets or transfer them to the trust.

With a Trust, you can keep your family out of Court and keep your affairs private.

“Funding” is the the legal term for making sure you transfer your assets to your trust.

Because Fisher’s Trust was unfunded, all of her assets and who will receive them became public.  As a result, we know that Fisher left her estate to her daughter.  The estate included cash accounts, several LLCs, real estate, a life insurance policy, personal belongings, and intellectual property rights. Because this information is now public, that leaves Fisher’s daughter at risk.  Unscrupulous parties now have access to details they wouldn’t otherwise know.

This is exactly why a key part of our trust planning process is a thorough inventory of your assets. If you choose an estate plan that involves a revocable living trust, we guide you through the trust funding process. And we offer a review of your assets and planning documents at least every three years, if not annually.

Proper estate planning can keep your family out of court and save your family precious time and money. Call us to create a comprehensive estate plan or to review your existing plan.

We don’t just draft documents, we help folks make informed and empowered decisions about life and death, for themselves and their loved ones. To schedule a Planning Session, call us at (813) 902-3189.

Click here to learn more about trusts and wills.

Here is an article about the Court case. 

Case Update: Jeffrey Epstein’s Estate

When the wealthy financier, Jeffrey Epstein, died under mysterious circumstances (the Medical Examiner determined that is a suicide, but many people are skeptical), he left behind a huge fortune close to $600 million, along with creditors and lawsuits. Just two days before his death, he signed his Will, which left his estate to his trust, the 1953 Trust. Because that Trust is not filed with the Court, its contents should remain private, barring litigation involving the Trust’s beneficiaries or trustee’s duties.

In the Will, Epstein is listed as a resident of the U.S. Virgin Islands. After his death, his Will was filed in the U.S. Virgin Islands, probably because his attorneys thought the probate process would be more private.

For regular people who are not rich or famous, privacy is still a huge deal. That is why many people opt for using trusts in their estate planning, instead of just relying on a Will.

Here are some important differences between a Will and a Trust:

Will characteristics:

  • A will goes into effect only after you die
  • A will only covers property that is in your name at your death
  • A will passes through a court process called Probate. In Probate, the court oversees the will’s administration and ensures the will is valid and the property gets distributed the way the deceased wanted.
  • Because a will passes through Probate, it’s a public record.
  • A will allows you to name a guardian for children (Note: Our firm recommends that in addition to this, you use a stand alone guardian nomination.)

Trust characteristics:

  • A trust can be used to begin distributing property before death, at death or afterwards.
  • A trust covers only property that has been transferred to the trust. In order for property to be included in a trust, it must be put in the name of the trust.
  • A trust passes property outside of probate, so a court does not need to oversee the process, which can save time and money.
  • A trust remains private Unlike a will, which becomes part of the public record, a trust can remain private.

Secure your wealth, your legacy, and your family’s future

Regardless of how much or how little wealth you plan to pass on—or stand to inherit—it’s vital that you take steps to make sure that wealth is protected and put to the best use possible. We have unique processes and systems to help you put the proper planning tools in place to ensure the wealth that’s transferred is not only secure, but that it’s used by your loved ones in the very best way possible.

By working with us, you can rest assured that the coming wealth transfer offers the maximum benefit for those you love most.

Call our office today at (813) 902-3189 to schedule a Planning Session and mention this article to find out how to get this $500 session at no charge.