Preparing for when a loved one passes will allow you to endure the loss without adding the stress and pressures of dealing with all of the details of an estate. If you’re wealthy, then the alarming tax rate on gifts has likely been of concern. Taking action by preplanning for the distribution of an estate allows peace to those you love who will be grieving and allows you peace of mind about the future and what will happen to your home.
A trust transfers the title of ownership of the property out of your name and into the trust instrument or trust, under the care of a trustee and provides protections to your heirs. The alternative, for those unprepared, is being assaulted with the harsh realities of infighting among the heirs, probate court, estate taxes, and creditors at the door. It is an emotional time and the worst time to be dealing with all of those people and problems.
If this isn’t the scenario you picture for yourself or your loved ones, here’s what you should know about real estate trusts in Connecticut.
Why Trusts Matter
Real estate deeded into a trust in Connecticut enables the beneficiaries to circumvent a great deal of paperwork and red tape during a challenging time by avoiding probate court.
Probate is a time-consuming and expensive process that can take several months or even years to conclude. The probate court also oversees the distribution of funds and ensures the repayment of any creditors against the decedent’s estate. In many cases the creditors are made whole first and there is little to no assets for family members to inherit.
A will sets out how the deceased wished for their trustee to distribute the assets. Since it is an act of will by the deceased when they were of sound mind their choices are reflected in the will at the time of its writing. With a will its a simple matter of reviewing the will with an attorney and distributing assets as decreed by the document. Without a will, the probate court determines the guidelines for distribution, usually set out by the state regarding inheritance and transference of the property title to the heirs. This is not always favorable or equitable to the heirs. The probate court does not consider what the deceased intended to do with the inheritance. They only follow procedure and the law and laws can change.
The heirs will receive the money at closing when and if the property sells.
There is a lifetime exclusion on the transfer of gifts or estates which is adjusted annually for cost of living increases, in 2021 the amount was set at 11.7 million per individual and 23.4 million for couples. After your lifetime exclusion is met, if you’re married and your spouse is deceased, their exclusion rolls over to the survivor. If your home is under a trust, your heirs will realize gift tax savings, ranging from 8 all the way up to 40 percent and generally paid by the gifter. The estate portion of this tax is applied upon death, and the trust may also protect the home from creditors.
Another benefit of real estate trusts is that they are private transfers of wealth, not a matter of public record as with probate. If you and your family need discretion then a trust will provide that level of privacy. It is a common that all sorts of individuals appear after the death of a loved one. Debtors, creditors, wayward family members, and strangers looking to profit from someone in their time of mourning.
Setting Up a Trust
Another thing you should know about real estate trusts in Connecticut is that there are dozens of structures, so it’s important that you take a careful examination of your options before deciding which type of trust suits your estate best.
Your estate may hold more value than you realize, and there are benefits to creating a trust so that your estate can be inherited by your heirs. You’ll need to gather all of your important documents and take a realistic assessment of your assets. It may be wise to get a professional appraiser that specializes in appraising estate property to provide a total value to the estate. This will help guide you in how to distribute the assets to heirs.
You may have a family member that you wish to ensure a supplemental income to, you can create a special needs trust that will fulfill your wishes. Perhaps you have a financially irresponsible family member, you can create a spendthrift trust that provides protection against their creditors as well as limiting access to the principal funds. When the trust is irrevocable, this means there will be no second-guessing your actions, there is no way to change your mind once your home or other assets have been transferred to the real estate trust. Many times situations can occur that were not planned for or even considered. Irrevocable trusts, however, qualify your beneficiaries for estate tax exemption, in most cases, so the matter should be carefully weighed.
Depending on how comfortable you feel with handling the process, you can create your own trust, you may also select to use one of many online service to create your trust, however its advisable to seek professional legal counsel. Many of these services many not reflect the specific law of the State of Connecticut.
You’ll also need to decide who will be in charge of handling the estate as your successor trustee, you should speak with them and be certain they are willing to handle the responsibility. You’ll then have the trust documents created and finally transfer the deed into the real estate trust. Then you will want to hold title to the property in the trust as the trustee, which includes your name entered precisely as well as the date the document was signed.
Next Door Properties can help if you need to sell your house after the loss of a loved one. With very little time involved, Next Door Properties wants to make the process as stressless as possible, making you a fair cash offer and closing in a matter of days or weeks. Next Door Properties understands this is a difficult time and our experienced real estate professionals are happy to answer any questions or concerns you may have. Send us a message or call Next Door Properties at 860-704-9513.