Trusts and your property

How important is it to put your property into a trust? Let’s do a case study. There once was a Mr. Smith who was unfortunately diagnosed with pancreatic cancer. Knowing that he didn’t have long to live and wanting to make sure his children did not have to suffer through the tedious probate process, Mr. Smith signed his property over to his three children. He had the real estate attorney draft a special deed with joint right of survivorship language. With this language, if one of his children passed away, the remaining two would get the deceased sibling’s share without having to go through probate.

Here’s the catch - the joint right of survivorship only delays probate for as long as one of the owners is alive. When the last owner dies, the property still must go through probate if it is not placed in a trust. When Mr. Smith’s children realized this, they went to speak to Mr. Smith, but it was too late. The deed had already been recorded. What’s worse was that one of the three siblings was legally incompetent, meaning that he could not sign any legal document. Now, while the three siblings could avoid probate after Mr. Smith’s death, they could not sell the property or take any protective measures because of the legally incompetent sibling. On top of that, due to owning a share of the property, the legally incompetent sibling lost his government benefits. Equally worse, Mr. Smith’s attempts to shortcut probate caused him to impose heavy capital gains tax burden that otherwise could have been waived for his children if he had transferred the property into a trust.

Although Mr. Smith did his best to protect his property for his children, his lack of knowledge caused him to make a costly mistake. If he had placed the property in a trust, he would have been able to avoid the probate process and allow for his legally incompetent child to have his share of the property without losing his government benefits. This isn’t his fault - but it’s an example of why you should always consult an estate planning attorney local to your area to understand the specific laws governing estate and assets in your county and state and choose the best estate plan for you while you are healthy and competent because emergency decisions involving your assets and family rarely accomplish your goal and do more harm than good.