March 22, 2021
How to Pass a House to the Next Generation? | Will Versus Trust
There are 4 ways to transfer assets to someone’s name.
1. Joint Ownership
2. Beneficiary Designations
In this episode Atty. Chris discusses these 4 ways and also about Lady Bird Deed.
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Passing a House
Hey everyone, this is Chris Berry with Castle Wealth Group, and today we’re going to talk about wills versus trust as it relates to passing a house to the next generation. If you find this information helpful, please make sure to subscribe, we’d really appreciate that.
Christopher Berry is a leading a state attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning, and as authored the Amazon best selling book, The Caregiver’s Legal Guide.
So this question comes up quite often, and I actually just got off the phone with a client talking about it, and we’re talking about how to pass this house to the next generation. And there’s six siblings, actually, and mine doesn’t have a lot of assets, really just the house, we’re just really focusing on the house. And so when it comes to passing assets, we need to understand how estate administration works. So when someone passes away, there’s only four ways assets can transfer out of someone’s name. First would be joint ownership, which is great for a married couple, second would be beneficiary designations, third would be through a trust, and fourth would be probate, where if an asset doesn’t pass through joint ownership, beneficiary designation, trust, then it ends up going into probate. And so with bank accounts and life insurance and IRA’s, a lot of times those pass through either joint ownership or beneficiary designations.
But a big issue is always what to do with a house. And so you could add your kids jointly to the house, but there’s a lot of reasons why that’s a bad idea. Number one, you’re opening yourself up to all of the potential liabilities of those people. So if one of those kids were to get a divorce, you might lose that house. If they were to get sued, you might lose that house. Or if they were to need long-term care before you, you might lose that house. And I actually had that situation come up in my practice, where mom had added daughter joint to her house as a way to pass the house to the next generation, but then daughter needed a nursing home and needed to go into a Medicaid facility. And now the question is, what does mom do with the house? So joint ownership is great for married couples, but I wouldn’t recommend it really in any other situation, especially with regards to real estate. And there’s a couple other issues that could pop up with that joint ownership, so let’s cross that one off the list.
Now we could do what’s called a Lady Bird deed. So we could do what’s called a Lady Bird deed, and a will-based estate plan. And the Lady Bird deed is a type of deed to say, it’s in your name while you’re alive, so it could be in mom’s name while she’s alive and then upon death it goes to whoever’s listed as a beneficiary. So it’s like a beneficiary designation for the home. So that’s a way to avoid probate with a house, and we do a lot of Lady Bird deeds, and we could just name the kids as beneficiaries. But the problem here is there are six kids, and they don’t all agree, and all six of them would have to sign on what they’re selling the house for.
So even though there wasn’t a lot of assets, a trust made the most sense because A, it avoids probate, and B, we can appoint one or maybe two trustees to handle the whole transaction. So they’d be in charge of figuring out what they’re going to sell the house for, they’d be the ones signing the deed to sell it to the sellers, they would deposit the funds into a trust account, and then from there they could distribute the assets amongst all of the siblings.
So a trust, when we appoint one or two trustees, it’s a better way to handle things, typically, because we don’t have so many cooks in the kitchen, so to speak. So hopefully that was helpful. Every situation is a little bit different. If you do like this information, please hit subscribe so you get notified of our Daily Wisdom YouTube videos whenever they come alive, which should be about a once per day. And then also you can join us on our Weekly Wisdom Webinars every Wednesday at 1:00 PM. You can just go to wisdomwebinar.com, and I answer question live in a virtual chat.
So this has been Chris Berry with Castle Wealth Group, thank you so much.
Castle Wealth Group has clients across the nation, and helps families plan, protect, and preserve what is important by creating a retirement and legacy blueprint.