Why A Living Trust Is A Vital Tool Of Homeownership

For many California homeowners, and folks who own in Coronado especially, the family home is their largest and most valuable asset. Yet a surprising number of people own their real estate as individuals, without a properly coordinated estate plan explaining who will manage and ultimately inherit it.

When someone dies owning a home in their individual name, the family may have to navigate a process called probate before the property can be transferred or sold. Probate is the court-supervised process used to settle an estate, address valid debts, and transfer property to the appropriate heirs or beneficiaries. Imagine asking your children to go into business with the DMV, except attorneys, court filings, deadlines, and your largest financial asset are all involved. That gives you some idea of what probate can feel like. This process often takes between 9 – 18 months and adds costs and substantial work during an already difficult time.

But I Have a Will. Isn’t That Enough?

A will is an important estate-planning document, but it does not ordinarily keep individually owned real estate out of probate. Instead, it provides instructions about how property should be distributed.

A revocable living trust works differently. It allows you to place assets in a trust while retaining the ability to still manage them during your lifetime. It also names a successor to manage those assets if you become incapacitated or after you die. Real estate properly held in a living trust can generally be administered without a full probate proceeding.

Creating the Trust Is Not Enough

One of the most common misunderstandings is believing that signing trust documents automatically places a home in the trust. It does not. The trust may say exactly who should inherit the property, but if the recorded deed still lists the owner individually, the trust may not control the home as intended.

Here are several ways a home can accidentally remain outside a trust:

1. The deed was never recorded. Someone establishes a trust but never completes the separate step of transferring the property into it.
2. The home is refinanced. A lender may require title to be changed during a refinance. The property is removed from the trust but never transferred back after the loan closes.
3. A property is purchased later. Someone creates a trust and then buys a new residence, vacation home, or rental property several years later without adding it to the estate plan.
4. The estate plan is updated without reviewing the property. When a trust is amended or restated, the deed and related documents should be reviewed to confirm that everything still works together.

Check Before Your Family Needs It

Start by obtaining the most recently recorded deed for every property you own. A Realtor may help locate the document, but a qualified California estate-planning attorney should confirm whether the vesting matches your trust and accomplishes your goals.

Do not assume that having a trust binder with all the documentation means your house was transferred into it. Verify it was transferred.

The worst time to discover a problem is after an owner has died and the family is attempting to manage or sell the property. A simple review today could save your loved ones considerable delay, expense, and frustration later.

This article provides general information and is not legal or tax advice. Homeowners should consult a qualified California estate-planning attorney before changing title.

Jim Nelson has been selling real estate in Coronado for 16 years and is consistently ranked within the top 100 agents across San Diego County. Have a question about real estate? Submit them to jameshnelson@gmail.com and your question could be the subject of a future article.