Question from S.F.
Mailbag: I Own a House and Not Much Else. Do I Really Need a Living Trust?
“Joel, my only real asset is my house. Do I need a living trust, or is that overkill? And what should a trust cost in Tulsa? A friend of mine just paid $3,600 for one.”
Answer
That's a good question, and one I suspect a lot of homeowners have asked themselves.
The short answer is that you don't necessarily need a living trust just because you own a house. But you do need to think about what happens to that house when you're no longer here to make decisions about it.
A house can be someone's largest asset, and without proper planning, transferring it to the people you want to inherit it can become an expensive and time-consuming process.
Let's look at your options.
First, What Happens If You Do Nothing?
If you own your home in your individual name and have no arrangement in place to transfer it outside of probate, your family will generally need to go through probate to transfer ownership after your death.
Even if you have a Last Will & Testament, that doesn't eliminate probate. A will tells the court who should receive your property and who should handle your estate. It doesn't bypass the court process.
And probate isn't just a matter of filing a few papers.
Your family may have to deal with court filings, notices to creditors, publication requirements, inventories, deadlines, and potentially multiple hearings.
The time and expense can be substantial.
Even a relatively straightforward Oklahoma probate can commonly cost several thousand dollars in attorney fees and related expenses. The actual amount depends on the estate and the work involved.
Time is another consideration. A simple Oklahoma probate commonly takes six to twelve months to complete. More complicated estates can take considerably longer.
Think about that for a moment. Your family could spend months dealing with the court system, paying legal and administrative expenses, and waiting for the property to be distributed.
And there's another consideration: privacy.
Probate is a public court proceeding. The will, information about the estate, and other court filings generally become part of the public record. For some families, that loss of privacy is an important concern.
What Does a Living Trust Accomplish?
A Revocable Living Trust is a legal arrangement that allows you to transfer ownership of your property into a trust while retaining control over it during your lifetime.
You generally serve as your own trustee and continue living in your home, managing your property, and making decisions just as you do now.
You also name a successor trustee who can take over if you become incapacitated or after your death.
When you die, your successor trustee follows the instructions in your trust and distributes the property to the beneficiaries you've named.
The big advantage? Properly funded trust property generally avoids probate altogether.
There is no need to open a probate proceeding just to transfer property already owned by the trust. Your successor trustee can begin administering the trust without waiting for a court to authorize the transfer.
Instead of a process that may take months, the successor trustee can often begin handling the necessary arrangements immediately. The actual distribution depends on the circumstances, but the probate process and its associated waiting periods are generally avoided.
A trust also provides a measure of privacy because the trust document ordinarily does not become part of a public probate court file.
One important point: A trust isn't simply a document you put in a drawer. Your property must be properly transferred into the trust for it to accomplish its intended purpose. That includes your home and potentially other assets.
Is a Living Trust the Only Way to Avoid Probate on Your House?
No. Oklahoma homeowners have another option worth considering: a Transfer-on-Death (TOD) Deed.
Oklahoma law allows you to record a deed naming the person or people who will receive your property when you die.
You retain ownership and control of your home during your lifetime. You can sell it, mortgage it, or revoke or change the beneficiary designation by executing and recording the appropriate documents.
When you die, the property can pass directly to the named beneficiary without going through probate.
However, there are some important differences:
It covers only the property described in the deed. It doesn't establish a comprehensive plan for your other assets.
It has specific execution requirements. Oklahoma requires the owner's signature, two witnesses, notarization, and recording with the county clerk before death.
Your beneficiary has responsibilities. After your death, the beneficiary must record an affidavit and supporting documentation, including a death certificate, within nine months. Missing that deadline can cause the property interest to revert to your estate.
A TOD deed can be a practical and less expensive alternative for someone whose primary concern is transferring a single property. But it doesn't offer all the management, incapacity, and distribution provisions available through a living trust.
What About a Last Will & Testament?
A will is still an important part of estate planning, whether you have a trust or not.
It allows you to identify who should receive property that isn't otherwise transferred through a trust, beneficiary designation, or other nonprobate arrangement. It also allows you to nominate the person you want to handle your estate.
If you have a living trust, a Pour-Over Will can serve as a safety net for property that wasn't transferred into the trust during your lifetime.
But remember: A will by itself does not avoid probate.
What Should a Living Trust Cost?
Let's return to the $3,600 your friend's attorney charged.
That may be a reasonable fee for attorney-prepared estate planning that includes legal advice and individualized planning. Attorney fees vary depending on the complexity of the estate and the services provided.
But not everyone needs that level of service, and not everyone can afford it.
At Peace Of Mind Estate Documents, our flat-rate document preparation fees are:
Revocable Living Trust
Individual: $399
Married couple: $499
See our Revocable Living Trust packages and what is included.
Our trust package includes preparation of the trust documents, a Memorandum of Trust, and one Oklahoma property deed to transfer your home into the trust.
We work with you by phone or Zoom, and we can assist customers anywhere in Oklahoma.
We prepare documents based on your instructions. We are not a law firm and do not provide legal advice or individualized legal representation. If you need advice about whether a trust, TOD deed, or another arrangement is appropriate for your circumstances, you should consult a licensed Oklahoma attorney.
So, Do You Really Need a Trust?
If your house is your primary asset, you may have several ways to arrange its transfer without putting your family through a full probate proceeding.
A TOD deed may be sufficient for some homeowners. Others may prefer the broader planning and flexibility of a living trust, particularly if they want someone to manage their property in the event of incapacity or anticipate acquiring additional assets.
There isn't one answer that fits everyone.
But here's something worth remembering:
You don't have to be wealthy to need an estate plan. You just need to care about what happens to the things you've worked a lifetime to acquire.
That's what planning ahead is all about.
Peace Of Mind Estate Documents
Helping Oklahoma families put their affairs in order.
Peace Of Mind Estate Documents is a document preparation service, not a law firm. We do not provide legal advice. Our services are limited to preparing documents based on customer instructions.