When it comes to planning an estate, people usually resort to the two most popular estate plans: wills and revocable trusts. The former is a court document that stipulates what happens to the assets and to whom they should be given to. Wills go through probate, where the court oversees the entire process.
Revocable trusts, on the other hand, do not need to go through probate. The assets of a person are proactively put into a family entity and automatically transferred to the trust beneficiaries upon the death of the owner.
People usually use either a will or a revocable trust depending on whether they want to avoid probate or not. If they want to avoid probate, they go for a revocable trust estate plan. However, there are a couple more things to consider before creating a revocable trust. Without the proper management of these things, probate might still be on the table.
1. Real estate assets
As a general rule, real estate properties always go through probate if not managed or planned properly. But there is a way that people can avoid probate — a transfer on death deed. When it comes to real property, the usual set up is a joint ownership where two people are named in the real estate deed. The joint owner then gets the real property upon the death of the co-owner without the need to go through probate.
But only one person can be named as a joint owner. So there are a lot of limitations in joint ownership setups, such as what happens if the joint owner cannot receive the assets or does not survive the deceased. This is where a transfer on death deed comes in.
The transfer on death deed is a document that allows a real estate owner to name backup beneficiaries in case the primary one doesn’t survive the deceased. If this deed is present, the property doesn’t need to go through probate.
2. Number of people getting the real estate property
Another thing to consider is how many people are supposed to get the house. With a transfer on death deed, the owner can only name backup beneficiaries in case the joint owner cannot receive the assets. But if the owner wants to give the real estate to multiple beneficiaries, the transfer on death deed is no longer appropriate.
The reason behind it is if more than one person is supposed to get the real property, all of them have to cooperate and sign the transfer on death deed. The likelihood of one person having poor follow-up and delaying the whole process is very high. It’s difficult to manage several beneficiaries in a transfer of death deed.
In this scenario, a more probable and practical choice is to have a revocable trust. A revocable trust is a family entity. So if the owner dies, the assets immediately go to the family and can be accessed and controlled by them without the need for probate.
These are the most important considerations to make before doing a revocable trust. If real property is the concern because the person wants to avoid probate, one can opt for a transfer on death deed instead. But on the other hand, if a person wants to name several beneficiaries, a revocable trust may be more practical.