To establish a trust, the trust “settlor” transfers property into the trust to be managed by the “trustee” appointed by the settlor. The trustee is charged with holding trust property for the trust beneficiaries as well as administering the trust according to the terms set forth by the settlor. A person may choose to create a trust for a number of reasons. For instance, if someone has minor children, the children would not be able to directly inherit from their estate. By creating a trust, the children’s inheritance is protected until they reach the age of majority and can receive the inheritance directly. Another common reason to establish a trust is as a means to avoid the lengthy and expensive probate process. Any property held in the trust will avoid probate. A trust can be funded with a variety of asset types. Is out of state property eligible to be held within a trust?
Can You Fund a Trust With Out of State Property?
Properly funding a trust is crucial to the success of the trust itself. Ownership of an asset must be transferred into the name of the trust. This is why trust property circumvents probate. The trust assets are held in the name of the trust itself and are not considered to be owned by the individual settlor. Since the property is not owned by the settlor, the person who passed away, it is not included in the probate estate.
A number of different asset types can be used to fund a trust. Securities and cash can be held in a trust as can insurance proceeds and real property, including homes and land. Out of state property can be used to fund a trust. In fact, it is often recommended that a person hold out of state property in a trust. You see, without out of state property being held in a trust, that property will go through ancillary probate after the owner passes away. That means that probate in state and out of state will be going on after the death of the property owner. If you thought one probate process was worth avoiding, you know all too well how beneficial it can be to avoid multiple probate processes.
Every state in the United States recognizes the validity of a properly executed trust regardless of which state the trust was established in. This reaffirms the point that out of state property can be used to fund a trust. Prior to transferring any type of property into a trust, however, there are certain important points that should be considered. First of all, you should consider the potential tax consequences of such a transfer. Second of all, you should consider the type of trust being established and your ability to access trust property and make amendments to the terms of the trust once it has been executed. A revocable trust, for instance, will give you flexibility as far as being able to amend the terms of the trust and access the property even after it has been transferred. An irrevocable trust, however, may have other benefits, but flexibility is not one of them. Once you move property into an irrevocable trust, there is likely to be no going back.
Florida Estate Planning Attorney
If you have out-of-state property, talk to the estate planning team at Verras Law about setting up a trust that will save your loved ones time, money, and stress. Contact Verras Law today.