A trust is a fiduciary relationship in which one party (trustor) gives another party (trustee) the right to hold title to property or assets for the benefit of a third party (beneficiary).
Although trusts are generally associated with the wealthy, they are highly versatile instruments that can be used for a variety of purposes to achieve specific goals. Trusts are created for 4 reasons:
Yahoo Life’s recent article entitled “Why You Should Put Your House in a Living Trust” explains some of the biggest errors people make with trusts.
Failing to retitle your home. If you don't retitle your home or transfer the deed into the name of the trust, you paid a lot of money for a piece of paper. The trust is empty because it hasn’t been transferred. Therefore, it is not covered.
Failing to notify tenants of the ownership change. If you're retitling a two- (or multi-) family home into the trust, and the property has rent-paying tenants, you need to inform must them of this change in landlord for rent payment purposes. You’ll also need to set up a bank account in the name of the trust for rent deposits.
Failing to tell the insurance company of ownership change. Be sure to tell your home insurance company about retitling to a trust. If not, the insurance company may deny your claim in an event because the actual property owner—your trust—wasn’t insured.
Failing to tell the bank holding the mortgage of the intended transfer. Note: the Yahoo Life article is incorrect here, when it warns about triggering the "due on transfer" clause in your mortgage when transferring your owner-occupied primary residence to your revocable living trust. In reality, such transfers are protected from accelerating the mortgage by federal law, specifically the Garn-St. Germain Act of 1982.
Don’t make these mistakes. Make an appointment with Thomas A. Vick, an experienced estate planning attorney, today to create a living trusts that works for you and your family.
Reference: Yahoo Life (Jan. 10, 2022) “Why You Should Put Your House in a Living Trust”