The Pros and Cons of a Revocable Living Trust

Sometimes clients come to an attorney wanting to create a Revocable Living Trust. What this means is that a legal entity, or trust, is created to house your assets for your use during your lifetime (hence the living), which you can cancel or change at any time (hence the revocable).

Pros and Cons

There are good reasons you may want to do this, and others why it’s not the best way to go.

The Pros:

  • Trust assets don’t go through probate. After the trustee passes away, the successor trustee (named in the original document) steps right in and becomes the new trustee. This means that all assets in the trust pass to this person (or people) without needing to go through probate.
  • There’s little time delay. Because the successor trustee has access to trust assets right away, heirs don’t have to wait until these items go through probate before they dispose of them, such as selling a home.
  • It affords more privacy. Unlike a will, a trust is not filed with the court, so the details of your trust cannot be accessed by the public.
  • You can change your mind. If you decide at any time that you want to move your assets out of the trust and back into your name, you can do so.

The Cons:

  • There are costs involved. A trust is a complex legal document that is best created by an attorney.
  • You have to “fund” a trust. All of your assets must be moved individually into the trust. This is a time-consuming process, as you need to contact your banks, investment and insurance companies, and other asset-holders to change the ownership of each account. You also need new deeds to move any real estate into the trust.
  • You still need a will—and maybe a probate. Assets falling outside the trust have to be probated by the court. I see this often in my practice, where home deeds or bank accounts were never moved into the trust, perhaps because they were acquired years after the trust was formed.
  • You have to pay taxes. Despite what many people erroneously believe, income earned by the trust during the trustee’s lifetime is attributed to the person, requiring the payment of income tax. And if the value of the trust at the time of the trustee’s death reaches the IRS threshold for estate taxes, the tax must be paid.
  • If a trust is lost, there is no way to retrieve it. Since this document is not filed with the court, the only version is the one you hang onto. A client recently came to me claiming she is the successor trustee, but since the trust was drafted decades ago and couldn’t be found, we had difficulty proving she was entitled to the inheritance.

For more information about whether a trust is right for you, contact the Law Offices of Gary M. Landau, P.A. at 954-979-6566 for a free consultation.

 

 

What an Attorney Does That a Title Company Doesn’t

attorney vs title companyYou’re about to purchase a new home or sell your old one, and you wonder whether you need an attorney or can “get away” using only a title company (as your Realtor may tell you). For little to no extra cost and much peace of mind, using an attorney to handle your closing usually makes a lot more sense.

For most people, the home is the most expensive asset you own. If you were buying or selling a business for the same price, you wouldn’t think twice about hiring an attorney. In real estate transactions, it makes even more sense to bring in a lawyer because in many cases the title company’s fee may not be any lower.

What you get when you hire an attorney over a title company is someone who not only handles the paperwork for your closing, but who also looks out for your legal interests. A title problem pops up during the process? An attorney can quickly clear it up. Get into a dispute about what furniture the seller is supposed to leave behind? An attorney can interpret the contract to see what you’re entitled to, then help you enforce your rights. See charges on your closing disclosure form you wonder about? An attorney carefully evaluates all charges to make sure you are legally bound to pay them—important because people often try to slip in extra fees hoping you won’t notice.

If you are buying a house in Broward County or selling one in Palm Beach County (the customs differ), you are generally the one who chooses the title insurance provider/closing agent. If you select an attorney, you get legal representation for a price similar to a title company’s, which doesn’t come with that representation. Attorneys also tend to be more thorough; I have been involved in many deals where the title company doesn’t do a complete city lien search, for example, claiming that is outside the scope of their job. This means if the home has outstanding permits, you may not know it until after you close.

What’s more, I have saved clients hundreds or thousands of dollars because I contested charges they did not legally have to pay. So even if the other side chose the closing agent and they hired me additionally, the savings often more than paid my fee.

In the state of Florida, the convention is to present an offer in the form of a signed contract. Here again, involving an attorney makes smart business sense. For a client that plans to hire a lawyer as their closing agent, many attorneys will review the initial contract for no extra fee. To keep that contract from being binding before the lawyer sees it, be sure to write “subject to attorney’s review within three business days” into the contract you are presenting as your offer. Then get it to an attorney right away, so he or she can be sure you are well protected.

Contact the Law Office of Gary M. Landau for a free estimate the next time you find yourself buying or selling your home.

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