Get your Docs in a row!

Jane Gray
Published on July 14, 2017

Get your Docs in a row!

It’s common to believe that inheriting property is going to be an easy process.   I mean, you’ve prepared.  There’s a trust or a will.  You’re all set right?

Unless you’re the surviving spouse of inherited property which will legally transfer somewhat quickly and without tax penalties, receiving an inherited property in almost any other circumstance, can be a lot more time consuming and complicated than most people realize.  The actual time and process may add considerable stress and aggravation to folks who are already dealing with the loss of a loved one. 

In this series, I’m going to go over some planning tips to be prepared, some tax tips once it happens, and some investment tips for after-the-fact.

Planning

Let’s start with what we can do beforehand.  Let’s say we’re lucky that nothing has happened and that we have time to create or change our Plan to protect our assets or the assets of our loved ones.

I’d always heard that I should have a living trust.  I went with my mother when she got her Living Trust done after my father passed away.  I remember going to an attorney in Auburn.  Very stuffy.  The attorney enjoyed displaying the fruits of her labor with over-the-top décor, views, and a large office.  The bill for it set my mom back a couple thousand bucks and my thought, at the time, was, “Gosh, I hope I don’t die before I can get this document done!”  I had small children to raise and that wasn’t in my budget.  Well, it turned out that I had the ability to do one by signing up through my employer for a legal plan for a year and it ended up costing me a couple hundred dollars plus, the very minimal amount they deducted from my paycheck for a year for the legal plan.   I liked that!  For me, the sticking point was the cost.  But for others, it’s the process itself because the thought of documenting all your assets can seem daunting. 

Where to get a Will or Trust

Recently, I discovered that you could get a Living Trust without having to pay exorbitant prices through an attorney. through a Legal Document Assistant.  These folks are allowed to draw up wills and trusts but they aren’t allowed to dispense legal advice.  They also make it very easy to clear the log jam by explaining and providing a simple list of documents and information they need.  For those fretting about the overhead of getting all your docs in order, it also doesn’t have to happen in just one sitting!  

So, is it enough to have a will?  A will is a good first step, but a living trust is better. From the Nolo.com website, here’s a good comparison between the two: 

Revocable living trusts and wills both allow you to name beneficiaries for your property. Beyond that, they are useful for different purposes.   For example, most people use living trusts to avoid probate.   But living trusts are more complicated to make, and you can’t use a living trust to name an executor or guardians for your children. You need a will to do those things.  More info from their website here.

Why should you have a Living Trust?

It’s always better to have a trust because then you’re avoiding probate.  Probate is a process where the courts get to make the decisions about how a deceased person’s assets should be divided after all their debts have been paid.  With a will and with assets above $100k, the court will pay the debts and will distribute the remaining assets accordingly (and the estate will pay the court for this service).  With a Living Trust, your property does not pass through probate. 

 

What could possibly go wrong?

With a trust, you are able to name a Trustee (or Executor) to follow the terms of the will for the deceased.  The Trustee may be one or more persons- family or non-family according to Jackie Jolley a Legal Document Specialist I spoke with in Roseville.  Jackie told me that it’s a common practice to choose co-Trustees so as not to hurt anyone’s feelings, but the downside, she said, is that with more than one person, there is often disagreement.

 John was a co-trustee with his 2 siblings when his mother passed away leaving a property in Texas.  The siblings were all in agreement that they should sell, but John was holding out for a higher price than the real estate agent felt that it could sell for.  When their disagreement could not be settled amongst themselves, the matter was turned over to probate.  The probate courts hired an attorney to appraise the property and the attorney was paid a percentage of the appraised value for his services.  Can you see a little conflict of interest there?  Not only that but the process wasn’t limited to just selling the home, so that at the end of the court’s involvement, Probate had spent down all the equity so there was nothing left to divide!  What’s the morale of that story?  Pick ONE Trustee.  Outline the process for how the house will be appraised.  Understand that Appraisers can appraise properties for much less than attorneys and Real Estate agents do it for free.

Spell out as much as possible beforehand.  Talk about what will happen with the property.  Will it be rented?  Will one sibling buy the other out?  Will you sell?  These discussions can seem awkward ahead of time, but when someone passes and you’re left with skimpy instruction and differing opinions, the waters can get murky and the emotional tug of war can be tiresome and you can all end up with nothing!  Oh and what if a will is contested?  A well-crafted sentence in a will or trust can help deter this from happening.

When you own real property (aka a home), you need to get a trust done! Real property should be held in the name of the trust. This isn’t just for your parents!  This advice should be heeded with the purchase of your very first piece of real estate.  

 I can’t stress enough the importance of getting a Living Trust.  I’ve heard far too many horror stories of people who died without a will or a trust. I remember a stressful story from a couple at my church where the father passed away and owned a business.  They said it was a nightmare and took a couple of years to get everything sorted out. 

Planning is essential whether it’s for yourself, your parent, another family member, or even a friend.  It may not be the easiest topic to talk about but the planning process is sure to make it easier on the surviving beneficiaries.  Even if your parent lives in the high-priced Bay Area, this is not like winning the lottery with a windfall 2 million dollar house to split.  Be prepared.  Have those difficult discussions beforehand so there are fewer hard decisions to make when your heart is heavy.

If you’re interested in getting more information:  Contact a Legal Document Assistant like Jackie who has years of experience putting together the full package of financial power of attorney, medical power of attorney, final disposition instructions offers and affordable option.  Fees at Jackie’s Roseville office are $695 for a couple.  They can also review trusts as well for a minimal fee of $25.  My plug for Jackie is that she is licensed to work in all 50 states so you don’t even have to make the trip to Roseville.  Check them out. Note:  I’m not against attorneys and in some cases, they are necessary, but if cost is factor in whether you get one done or not, Go to a Legal Document Specialist!

Next up:  The tax consequences of inheriting a home

 

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