Why You Should Trust a Trust

Trusts are a commonly known tool, that are too rarely utilized, and often not fully understood. But before we dive in, I must yet again remind you that I am by no means an expert in trusts, or any legal matters, so please discuss the particulars with a licensed professional before making any decisions. Trusts are an arrangement whereby a person (a trustee) holds property as its nominal owner for the good of one or more beneficiaries. The trustee is chosen by the grantor (the one who creates the trust), and it can be anyone they'd like. A trustee is responsible for properly managing all property and other assets placed in the trust for the beneficiaries. A trustee's specific duties are unique to the trust agreement and are dictated by the type of assets held in the trust. For instance, if a trust holds various rental properties intended to be used for income, it will be the trustee's duty to ensure those properties are managed, maintained, occupied, and generating income. Trusts are either revocable or irrevocable. Revocables are easily adjustable, whereas irrevocable trusts are MUCH more difficult to change after their initial creation. You could also, for example, create a revocable trust that automatically turns into an irrevocable trust if the trustor becomes incapacitated. Looking at this through a real estate lens, if you don't have your property in a trust, and you die, your property will go to probate. Probate is the legal process that you must follow to transfer or inherit property after the person who owned the property has passed away. Probate typically takes anywhere from nine to eighteen months to process, and costs between 4% - 7% of the estates total value (that's $25,000 at 5% of a $500,000 home). Or, for about $4,000 (to a local firm) you can have a trust created, place your property within it, and create a succession plan, saving your loved ones, who you choose to leave your assets to upon your death, a ton of money, time, and hassle. Not to mention it negates the likelihood of drama and disdain between family members vying for a larger piece of the proverbial pie.

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