DEAR BOB: I am recently widowed. The house is now in my name. How do I prevent probate, how expensive is it, and how long before my heirs can sell the house? Should I add my heirs’ names to the title of my house now? –Phyllis L.
DEAR PHYLLIS: Whenever possible, it is best to avoid probate court costs and delays. After your death, it may take six months to a year or longer to convey title if you leave your house and other major assets to your heirs by your will. The probate costs vary widely by the state statutory legal fees involved.
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However, if you leave a small estate, many states have probate avoidance exceptions. But a home worth $100,000 or more usually puts you out of this small estate exception.
The two major ways to prevent probate of your residence are (1) holding title in your revocable living trust, or (2) holding title in joint tenancy with right of survivorship with your heir. Either method will avoid probate court costs and delays.
However, the major drawback of joint tenancy is that you give up control over your home. To illustrate, suppose you add your heir’s name as a joint tenant. But you later decide to sell the house, perhaps to pay for care in a convalescent home. Unless your joint tenant consents, you can’t sell your residence.
But there are no major drawbacks to a revocable living trust. You can change your beneficiary at any time. Or you can revoke the living trust. More details are in my special report, “24 Key Questions: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com.
IS IRREVOCABLE TRUST REALLY IRREVOCABLE?
DEAR BOB Sixteen years ago I set up an irrevocable trust to provide for my two daughters. The trust assets included several properties, common stocks and other assets. The result is it made my daughters rich snobs. Their husbands married them for their money, not for love. One has since divorced. The other stays married for their children. Is there any way I can “undo” this irrevocable trust, which did no good and created unhappiness for all concerned, especially me? –Evelyn H.
DEAR EVELYN: Unless you were incompetent at the time you created the irrevocable trust, I am not aware of any way to “undo” the trust. There were probably tax advantages that might have motivated your creation of the trust.
Your sad situation shows why irrevocable trusts are rarely desirable. Please consult an experienced trust attorney, but don’t get your hopes up to revoke that trust.
DO LENDERS GET KICKBACKS FROM TITLE INSURANCE COMPANIES?
DEAR BOB: I enjoyed your recent item about homeowner’s warranty companies and their tricks to avoid paying claims. In your experience, do title insurance companies get kickbacks from mortgage lenders for referring business? I know mortgage lenders require title insurance, but do they get fees for recommending specific title insurers? –Andrew B.
DEAR ANDREW: It is illegal for title insurance companies to pay a “referral fee” or any other kickback to a mortgage lender who refers business to a title insurer. Of course, there are “cozy” relationships, where a title insurance representative takes a mortgage lender out to lunch. But monetary payments are strictly illegal.
The new Robert Bruss special report, “2006 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Investors,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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