My home has a value of about $185,000. for tax purposes. I have it willed to my daughter. Will it have to go through probate when I die, or do I need a trust?
1 Answer from Attorneys
I can't possibly answer that question without knowing about your circumstances and other assets.
Generally, you can pass land one of three ways:
(1) If the land is paid for, you can add your child's name to the deed and own it with her as joint tenants with right of survivorship. If something happens to you, the land will automatically pass to her upon your death. However, I don't recommend this for several reasons - you could have as falling out with your daughter and if that happens, once deeded over you, you will not be able to get the land back unless she would willingly convey it to you. You also will not be able to sell or mortgage or refinance the home unless she agrees. There are also gift and Medicaid considerations so I would not recommend this options.
(2) You can make a will and leave the home to your daughter. If your home is your only significant asset and you do not have any other children who would possibly challenge the will, then what you have is fine. While the home is not part of the probate estate, just making a will does not mean that you can avoid probate. If there are other debts, these are the responsibility of your probate estate. If the bills cannot be paid from whatever assets you have, then the executor could petition to sell the home, use the money to pay your debts and give the rest to your daughter. I don't know what your financial situation is or how you plan on paying your bills (you may need long-term care at some point) so I don't know whether this option is ok.
(3) Make a revocable living trust. Even though your home is mortgaged, it can be in the trust. There are no tax/gift issues and if you change your mind at any time as to whether your daughter should be your beneficiary, you can just amend your trust. Further, a trust is more difficult to challenge/contest and is a totally private document. Nothing needs to be filed with the court.
For most people though, its a question of paying now or paying later. A trust can cost anywhere from $1500 to $2000 or more depending on the complexity of your estate plan. That has to be be paid now and that puts some people off. However, probate has consequences too. Its "'paying later" and while you don't pay personally, your personal representative will have to pay. There is a fee to probate a will. There are probate fees (the clerk charges $6.00/per $1000 of assets capped at a maximum of $6000). There are fees to run an ad in the newspaper advising of your death. If your personal representative decides to hire a lawyer to help administer the estate, there are fees for this too. All the fees add up.
Trusts are not for everyone. Not only must you pay, but you have to make sure that your trust is funded by conveying your home and other assets into the trust. You also need to remember to put assets into the trust if you sell your home or get a new car or acquire another piece of land. Some people find this to be a lot of work. My answer is yes, it does require work to make sure it is done properly, but its worth it if your goal is to minimize or avoid probate.
I do draft wills or trustand related estate planning documents (powers of attorney for healthcare and finances and advance directives). If you are interested, please contact me at [email protected]