Avoiding Probate Living Trust Tips (Investors DO THIS!)


– Hey guys, this is attorney Toby Mathis from Anderson Law Group
and Business Advisors. Today I wanted to talk about real estate and estate planning. And specifically, how to
screw up your real estate when doing an estate plan. And I’m gonna kind of go through this in a few different ways. (upbeat music) subscribe to the YouTube channel, click the bell notification icon so you know when a new video is uploaded. Tax laws are changing all the time, the laws are changing all the time, this way you’re first to know, you’re first to grow. First off, if you own real estate, and you do not put it
in some sort of entity when you pass away, it’s absolutely guaranteed
to go through probate. It’s gonna have to go through a process which by all estimates, will take a chunk of its value, and take somewhere
between six and 18 months. And I’m giving you a broad stretch because about the lowest
you’re gonna be able to see it get transferred in is six, and the average is about 18 nationwide. But if all you had was a piece of property that was held in your name, you might be okay. Now here’s the problem, everywhere you own real estate
is subject to that same rule. Which means every state requires probate. So if I own real estate in multiple state, and I do not put it in a correct plan. I don’t use an entity, I don’t use my land trust,
my LLCs and my living trust. If I don’t use these things, then I am going to force my heirs to go through a process where they’re required
to go in front of a judge in every state where I
have the real estate. So if it’s in three different states, I am looking at three different probates, which means more likely than not that I’m gonna end up with
three different lawyers, or law firms charging
me three different fees just for the sake of
transferring property. Now before you say that doesn’t happen, I will say my personal experience in this was that my grandmother passed away with properties in two different states. They were just lots, one was a lot with a home on it, and the other one was just a
lot in Alabama and Florida, and it was less expensive to
let them go back to the state than to deal with the rigamarole of going through the transfers. And it wasn’t my problem
that I had to deal with, it was her son’s, which was my father’s responsibility in having to deal with that. And he was shocked. These were not valuable
pieces of real estate, but even so, even though
it should have been simple, all lawyers are gonna tell you probate in my state is simple. It’s not cheap, it’s not quick, and when you involve real estate, it’s not any of those things. It’s not cheap, it’s not fast, and it’s certainly not simple. Otherwise they wouldn’t be charging you these big fees that they charge. Now, the solution is actually very easy. If you put the piece of property, if nothing else, just use trusts, you’re gonna avoid probate. You’re gonna avoid it by making sure that you have beneficiaries who get that property after you pass. There is another way to do this, which is a paid on death, or a joint tenants, but I tend to avoid those simply because they don’t stop
some of the little nuisances that can pop up. For example, somebody pre-deceases you, then it didn’t do you any good. If you give it to somebody who has some financial issues, doesn’t do you any good. If I’m a joint tenant on somebody and I want to transfer it, now I have to get their approval. You get all sorts of little issues. And I just, I’ve actually seen that occur on more than one occasion, the last one I saw was
somebody who got remarried, and they had had a piece of property where they added one of their children, and they needed the child’s approval to transfer it back into the
estate plan to go to mom. And the child never did that. And as a result, the child
ended up with the property at the expense of the mom, who they’ve been married
for a long period of time, and all of a sudden she
doesn’t have a home. And she’s relying on the child to decide it’s okay, you
can still stay there. Which is not a comfortable situation, in this particular case they said no, not a pleasant situation at all. So I tend to say, whenever we’re dealing with real estate is it’s better to have
your plan in writing and to avoid courts. The old adage was what do you call an attorney with an IQ over 70? Your honor. So you wanna avoid the judges, you don’t wanna go to court. And there’s a surefire way to go to court when dealing with estate planning, which is to do nothing, or to do a will. And I’m not gonna, I don’t
want either one of those. What I’m gonna do is
opt for using a trust. Now if you’ve heard, using LLCs for asset
protection, absolutely. LLCs are fantastic asset protection tools, they work great with tax planning, and a whole bunch else, absolutely. But at a minimum, we wanna have a trust. And an LLC by itself will
not get the job done, we need to have a living
trust for our estate plan, and in a living trust, if all we were looking
at was estate planning, if we didn’t care about asset protection or tax planning or anything else, if all we wanted to do was make sure that an estate avoided going through the court process, and avoided probate, then what I would end up
doing is a living trust. Simple, and I would just put
those properties into it. And if I had properties
in 10 different states, guess what, I’m not
probating in those 10 states. The properties are already held in trust, and a trust, just to make
it real simple for you, really has three parties. You have a grantor, where the person who starts it settlor, however you wanna term it, the person who gives
the asset to the trust. You have a trustee, and that’s the party
who oversees that asset, and makes sure that it’s
used for the benefit of number three, the beneficiaries. Now here’s the beautiful
part about a living trust, during your lifetime you can be all three, and you can change them
out, it’s revocable. You can completely change
it anytime you want. Once a triggering event occurs, which is gonna be either
you’re incapacitation, or you pass away, it becomes irrevocable. Now we just go down succession, who’s gonna be the next trustee? Who’s gonna be the next beneficiary? We don’t need a new grantor ’cause you’ve already put
the property in there. But now the trust owns it, and we don’t need to go to court ’cause we already have
these things designated. And you don’t have to
name specific individuals, you can use a trust company, for trustees, you can use
individuals then trust companies. The other route you
can go on beneficiaries is to use a term of art like descendants. Hey it’s gonna go to my descendants, and maybe I’m not even
gonna distribute the assets, maybe it’s just gonna be held in trust for the benefit of my kids and my kid’s kids, and my
kid’s kid’s kids, et cetera. And you can even put specific purposes, they’re absolutely fantastic vehicles. But for real estate,
it’s just very important that we make sure that we’re not just leaving this stuff to chance. Worst thing you could possibly do is to own real estate in multiple jurisdictions in your name, just don’t do it. Make sure that at a minimum
you have a living trust. And the best practice, as anybody who’s in this world that’s in real estate
extensively will tell you is to use an LLC to hold properties. Sometimes it’s one per LLC, sometimes there are situations
where you might have others, especially if you’re dealing
with commercial lenders. But you’re gonna want to talk to somebody knowledgeable on this. So I hope this helps you
make better decisions, especially when it comes to
estate planning and real estate. (upbeat music)

Leave a Reply

Leave a Reply

Your email address will not be published. Required fields are marked *