Should My Home Go Into A Trust? | Advantages Of A Personal Residence Trust

What to do with your Home? How should your Home be situated from a Legal perspective? There are different ways to do it depending on what your goals are. Attorney Chris Berry discusses the different ways to handle Real Estate in this episode of Daily Wisdom.

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With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.


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Episode Transcript

Handling Real Estate

Hey, this is Chris Berry with Castle Wealth Group, and today we’re going to talk about the advantages of a personal residence trust. And if you like this information, please make sure to subscribe to our YouTube channel.

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplinger, 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 has authored the Amazon best selling book, The Caregiver’s Legal Guide.

So the big question we always get is, what to do with your home? How should your home be situated from a legal perspective? And there’s different ways to do it depending on what your goals are. So our approach is always, figure out what are your goals, then develop the best strategies to help you achieve the goals, and then pick the right tool. And so there’s different ways to handle real estate. The old school way, because most people want to try to avoid probate because it’s court process, it’s time consuming, it’s costly, the old school way would be maybe adding one of the kids jointly to the deed, to the real estate. And that’s a problem, because you get into tax issues, plus now you’ve opened yourself up to all of the liabilities of that individual. So if you were to add your son joint to your home, and then your son gets a divorce or needs longterm care, gets sued, you might lose your house. So joint ownership, bad. We don’t want to do that.

And then we’ve seen the deed in the drawer trick, which also I don’t recommend. The deed in the drawer trick is you sign the deed for your home, you put it in the drawer, you put it in your estate plan, you don’t record it with the idea that when you pass away, now your kids will find it and they’ll go and record it and transfer it to whoever you listed on that deed. That’s problematic, because technically when you signed that deed, that’s the transfer. Second, you’re probably not filling out the property transfer affidavit that needs to go to the city. So your kids might get fined or harmed from a tax perspective because of that approach. Plus, third, you might lose that deed, in which case then the kids have to go through probate court. So the deed in the drawer trick, we don’t want to do that either.


Lady Bird Deed

Now, the next option is what’s called a lady bird deed, and this is a very common way of handling real estate. We do this quite often in our office. And what a lady bird deed says is the home is in your name while you’re alive, you can refinance it, you can do whatever you want, you can sell it, but if you were to pass away, the home goes to whoever you listed as a beneficiary on that deed. It’s called the lady bird deed. It’s named after Lady Bird Johnson. But a lot of times this is how we fund the real estate into the trust. The nice thing about this is it avoids probate. Plus, it avoids estate recovery, where if you were to need nursing home care, the State of Michigan can place a lien on your home to recover whatever Medicaid paid out in benefits.

But they can only place the lien on assets that end up in probate. So the lady bird deed will avoid probate and also avoid estate recovery. So the lady bird deed is a great tool. But there’s one step up from there, and that’s putting the house, your primary residence, into an asset protection trust, into what we call a castle trust. So we put the house into the castle. The castle avoids probate. It protects it from lawsuits, protects it from creditors, protects it from estate recovery. The home is exempt and protected if you’re to need nursing home or Medicaid, no matter what the value of the home is. And also, if you wanted to sell the home, the proceeds of the home would remain protected inside of that trust.

So if you are concerned about longterm care costs, moving the house into an asset protection trust, not a revocable living trust, not a basic revocable living trust, it doesn’t offer you any asset protection, but if you’re looking at protecting your home from creditors, from lawsuits, from longterm care costs, you want to avoid probate, you want to avoid estate recovery, you want the flexibility to sell the house while you’re alive and the proceeds would remain protected from creditors, bankruptcies, lawsuits, and nursing home spend down or Medicaid spend down, then you might want to look at putting the home into an asset protection trust like a castle trust. So the lady bird deed is good, it avoids probate, it avoids the essay recovery on the backend.


Avoiding Probate

But moving the house into a castle trust might be a better approach offering you more protection, because it avoids probate, avoids estate recovery, you can sell the house and the proceeds remain protected. Plus, the home is protected once you’ve made it five years from the time you move the house into the trust, no matter the value of the house from that nursing home or Medicaid spend out. Because currently in Michigan, if the home or farm is valued at more than $500,000, then it is not protected. It is not exempt from that nursing home or Medicaid spend down. So if you tried to qualify for Medicaid and needed nursing home care, they’d force you to sell that house and spend down your money to qualify for Medicaid. So that’s the downside of the lady bird deed. If we move it into the trust, no matter the value, if it’s $700,000, $1 million, $500,000, the home remains protected while you’re alive, avoids probate upon death, the proceeds can go to your beneficiaries and if you wanted to sell the house while you’re alive, you could sell it and the proceeds would remain protected.

So different approaches for handling real estate. Most people’s basic goal is to avoid probate. You can do that with joint ownership, but you’re opening yourself up to a whole can of worms. You can do that with that deed in the drawer trick or the quick claim deed, but you’re opening yourself up to a whole can of worms, additional problems potentially. So at the very least, we probably want to do a lady bird deed. But if you really want to protect that home, you’re probably going to want to deed that home to a castle trust, to that asset protection trust, so you have flexibility while you’re alive, you have protection while you’re alive, it avoids probate and goes to your loved ones in the manner that you want. Hopefully, this has been helpful. This has been Chris Berry with Castle Wealth Group. Make sure to subscribe. Thank you.

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.



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