By Barry Zimmer on September 7th, 2021 in Estate Planning, Estate Planning
An investment in a vacation home can be money well spent. You have the opportunity to get away with your family members and friends when you have the time, and this is a beautiful thing.
Plus, from a financial perspective, real estate is usually going to be a good investment. On an estate planning level, you should address estate administration realities if the property is in a state outside of Ohio.
Ancillary Probate
If you use a will to serve as your asset transfer vehicle, you would name an executor in the document to act as the administrator after your passing. They would be required to admit the will to probate, which is a court supervised process.
The executor will pay outstanding debts during probate, including taxes. They are entitled to remuneration for their services, and the executor may engage an accountant and a probate lawyer, so there can be professional fees.
Property is inventoried and prepared for distribution, and this will involve liquidation and appraisals that will add to the expense ledger. When you mix in any incidentals that pop up along the way, a relatively significant amount of money is spent during probate.
Since probate is a public procedure, anyone that wants to access the records can find out what transpired, so there is a loss of privacy.
All of this is magnified if you own property in another state and it is going to be transferred through the terms of a will. An ancillary probate procedure would be necessary in that state, so there would be two different probate processes is to navigate.
Revocable Living Trust
You could use a revocable living trust to facilitate asset transfers instead of a will. Some people do not consider the possibility of using a trust because they think they lose access to the assets, but this is not the case.
When you have this type of trust, you would act as the trustee while you are alive, so you would have direct access to any asset that is held by the trust. You can rescind or revoke the trust at any time, and you have the ability to change the terms along the way.
The successor trustee that you name to assume the role after your passing can also be empowered to manage the trust in the event of your incapacity. After your death, the trustee would distribute assets to the beneficiaries in accordance with your wishes.
Probate would not be necessary, even if you own property in two different states. This is one of the benefits that living trusts provide, and there is another one that is very important to some people.
If you have someone in your family that is not good with money, you may not want to leave them a direct lump sum inheritance all at once. This would be the arrangement if you use a simple will as your sole asset transfer device.
On the other hand, if you utilize a revocable living trust, you can include a spendthrift provision. The trust would become irrevocable after your passing, and the beneficiary would not be able to reach the principal. This would also apply to their creditors, so there would be asset protection.
You can instruct the trustee to distribute assets to the beneficiary in any manner that you choose, so you can spread out the distributions over time to prolong the viability of the trust.
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The sessions are free, and you don’t have to go anywhere to join us, so this is an opportunity that you should not pass up. You can see the dates and obtain registration information if you visit our Cincinnati estate planning webinar page.