In the past, this blog has stressed the importance of estate planning, such as creating a will or a trust to pass your property on to your chosen heirs after you die. However, some individuals in Kansas City would rather gift their children property while they are still alive rather than placing that property in a will, which would only take effect after they die. Oftentimes this is because an individual would like to see what his or her loved one does with the property, and they want to see their loved one enjoy the gift. However, there are reasons why placing assets in a trust may be a sound option.
For example, say an individual has two homes–the one they raised their family in and a winter home they purchased later in life. Once the winter home becomes the individual’s full-time residence, he or she might want to gift the childhood home to their child. However, there could be advantages to putting the home in a trust instead.
If the home is placed into the right kind of trust, it may be possible to give the child the irrevocable right to maintain the home as his or her residence. In addition, some trusts allow the parents to reserve the ability to stay in the home during their lifetime should they so choose. Under certain circumstances, the right kind of trust may be able to protect the home should the child divorce, should the child be sued or should the child file for bankruptcy.
Of course, the laws regarding gifting of property and the protections a trust can provide vary by state, and this post cannot serve as legal advice. Therefore, it is always good to research your state’s laws before deciding whether to gift a property or place it in a trust when creating an estate plan.
Source: Yuma Sun, “Estate Planning: Should I give my children their inheritance now?” Shawn Garner, April 11, 2016