Trusts For Your Home

At one time, only the wealthy resorted to the use of a trusts to protect assets; however, it is now almost a commonplace to see trusts used even if the only asset in the trust is a home.

There are a few possible motivations for putting a home in a trust. The two principal reasons are either, the hiding of assets or the ease of passing down the home to heirs. While putting a home in a trust does not eliminate the need for a will, it takes care of dispensing what is often the major family asset.

Fear of lawsuits and a method for non-married, cohabitants to designate heirs and avoid lengthy lawsuits upon death, are other reasons trusts are used.

One feature common to all trusts, is transferring the ownership of the property into another entity. When this is done with a home, the motivation is often to remove the asset from the personal names of a married couple, so that a home passes to the children and the potential nursing home bills are paid by the state.

Most states have passed laws, allowing the state to back up 3 or 5 years, and recapture the assets of the house to contribute toward the state paid, nursing home’s expenses.

One oversight when pursuing this arrangement, is many homeowners do not think to notify their insurance agency of the change in ownership. Technically, if the trust owns the home, it is not covered on your homeowners as you do not own it any longer. Making the trust an additional insured is one means at addressing the problem, but even trust has potential problems which should be discussed with your agent.

E.G.  there are revocable and irrevocable trusts, each having a different impact on the courts view of the validity of the trust as an instrument for getting the home out of your ownership.

Do not accept quick, easy answers to this as several questions came into play. Do not want to leave yourself at the discretion of the insurance company as to whether they want to pay for the total fire loss to your home, or not?

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