In the realm of estate planning, two pivotal terms - "trust" and "probate" - hold immense significance when it comes to the distribution of your real estate assets after your passing. In this blog post, we'll not only explore the fundamentals of trusts and probate but also shed light on how incorporating real estate into this equation can be a game-changer, particularly in the context of your estate planning.

What Is a Trust?

A trust is a legal mechanism that enables an individual, often referred to as the "grantor" or "settlor," to transfer their real estate holdings and assets into a "trust." This trust is typically overseen by a designated individual or entity called the "trustee." The trustee's role is to effectively manage and administer the real estate assets on behalf of the settlors and ultimately the beneficiaries, who are individuals or entities specified in the trust document and entitled to receive the benefits or assets from the trust.

What Is Probate in the Context of Real Estate?

Probate, when intertwined with real estate, is the legal process that unfolds after an individual passes away. It encompasses the validation of the deceased person's will (if one exists) and the administration of their real estate holdings and other assets. Key components of probate concerning real estate include:

● Validating the Will: If the deceased person had a will, the court assesses its authenticity and ensures that it complies with the relevant legal requirements.

● Real Estate Inventory: The court identifies and documents all the real estate assets, among other assets, belonging to the deceased.

● Debt Settlement and Tax Obligations: Prior to distributing assets to beneficiaries, debts and taxes owed by the deceased are addressed and settled from the estate's real estate and other assets.

● Real Estate Asset Distribution: After settling debts and taxes, the remaining real estate assets are distributed to heirs or beneficiaries according to the stipulations in the will or in accordance with state law if no will exists.

Why Real Estate Owners Should Consider a Trust to Avoid Probate

For real estate owners, considering the establishment of a trust to bypass probate is highly advisable, and here's why:

Streamlined Process: Probate proceedings can be protracted, causing delays in distributing your real estate assets to beneficiaries. Trusts offer a more efficient and prompt mechanism for real estate transfer.

Cost Savings: Probate entails court fees, legal expenses, and various other costs that can erode the value of your real estate estate. By opting for a trust, you can curtail these expenses, preserving a larger portion of your real estate assets for your heirs.

Privacy Assurance: Unlike probate, which is generally public, trusts afford greater privacy for your real estate holdings. This means that details about your real estate, debts, and beneficiaries are kept confidential.

Control and Flexibility: Trusts grant you enhanced control and flexibility over how your real estate assets are managed and disbursed. You can establish precise conditions and timelines for real estate distribution, ensuring that your wishes are upheld faithfully.

Seamless Multi State Real Estate Management: If you own real estate in multiple states, circumventing probate can simplify the intricate process of real estate asset transfer across state lines.

Continued Financial Stability for Beneficiaries: Probate can tie up real estate assets and disrupt income streams, making it challenging for beneficiaries to maintain their financial well-being. A trust can help mitigate such interruptions.

TIP: If you remove your home from a trust to refinance it, don’t forget to put it back in the trust! If you forget, the assets previously protected by the trust may now be vulnerable to probate proceedings upon your passing, potentially leading to delays and added expenses in transferring the property to your intended beneficiaries. Moreover, the privacy that a trust typically affords in asset distribution may be compromised, as the property's details may become public record through probate. Additionally, the legal structure and tax benefits associated with the trust, such as potential estate tax savings, may no longer apply to the property, impacting your overall estate plan. To rectify this situation, it's crucial to reestablish the property within the trust, ensuring that your original estate planning objectives are preserved.

In summary, grasping the distinction between trusts, probate, and real estate is pivotal for astute estate planning. At Salzman Real Estate Team in Manhattan Beach, we're fortunate to have the expertise of our team members who have many years of Trust and Probate experience. For further information, please email us at info@salzmanteam.com or call (310) 545-2260. Your real estate legacy is our top priority.