I’m a 30-something female working for the City of Los Angeles. I bought a condo in 2015 (solely in my name). I am unmarried but have a live-in boyfriend. I’ve heard about living trusts from my parents. I am wondering if I need to have one in case something happens to me. If I don’t have one, what would happen to my condo?
Also, can you please explain what the pros and cons are associated with living trusts? How much does it cost to create one and revise it, if needed? I also don’t have a will and am wondering which is more important to have — a living trust or a will? How will having either be affected if I get married?
Both a will and a living trust are estate-planning documents. A will is a document that allows you to designate who will inherit your real estate and personal property along with stocks, bank accounts and other items you own.
A will, however, will require that your estate go through probate. That means that upon your death, someone must go to the probate court and deliver a copy of your will to the court. An executor of the will then is approved by the court, and the executor can then handle the distribution and sale of assets and take care of any other estate affairs under the supervision of the probate court.
Obtaining a will isn’t difficult, and an estate attorney or other attorney experienced in drafting wills can take care of it for you. The cost can be rather basic for a simple will, or quite expensive if your financial matters are complicated. When we say that the fee can be small, you might find attorneys willing to do simple wills for less than $1,000, but keep in mind that simple means very formulaic: You don’t have much in terms of real estate (other than your condo), some items of personal property (jewelry, furnishings, a car, etc.) and some bank accounts.
When you have many different real estate holdings, stock and bank accounts, minor-age children and distribution issues, you’ll find that attorneys will have to charge you more because of the additional work in handling the questions and the drafting of the document. We can’t tell you how much more, as it will vary by location and the type of attorney you hire to handle the transaction.
A trust is a document that allows you to transfer the ownership of your real estate, bank account and financial holdings to a different entity. That different entity is your trust. The trust would “own” these items, but you would be the beneficiary of the trust and thus control the trust and be the “effective” owner of those items.
But, upon your death, the trust would still be the owner of your real estate, bank account and other financial holdings that were in the trust’s name. You wouldn’t need to go to court to have the court supervise the administration of those items. The successor trustee — you would be the initial trustee of your own trust —would handle your affairs and could sell off your real estate and stocks and close your bank accounts. Your trust could designate what you want done with your real estate holdings, your bank accounts and other holdings.
The cost of setting up a trust can be a bit higher. That’s partly because you have similar document-drafting issues as with a will, but you would also have the cost of having all of your assets retitled from your name to the name of the trust. When it comes to your home, you’d have to transfer title in your home to the trust. If it’s your car, you’ll have to retitle the car in the name of the trust. The same would go for bank accounts and accounts with financial institutions. If you don’t re-title your assets, they are not part of the trust.
Here’s where it starts to get complicated. Since everything you own won’t go into the trust, you will likely also need a will to make sure all of your assets and property are accounted for. So if you have a bank account that never got retitled or jewelry and other personal effects that are not owned by the trust, your will would dispose of those items as you intend.
While paying for a will and a trust means a double payment, having both will cause the least pain for family members taking care of your estate after your death.
In your question, you talk about your condominium. If that is the only thing you own, a will may be sufficient for you. But a trust might be equally as good. Or both could allow you to own that now and cover other items in the future. What we are getting at is that your question is really specific to your situation, the value of your property and what you are looking to do, how to do it and how much you might be willing to spend now.
Finally, one advantage a trust may have, depending on the state you live in, is protecting your premarital assets from spousal claims after marriage. However, in some states, if you live with someone long enough, your long-term partner may have similar claims. Since you are living with someone, you might want to have some agreement spelled out to address possible future ownership claims. You might even want to draw up a partnership-type document if both of you are contributing toward the condominium expenses and costs. Please talk to a local attorney for more information.
Ilyce Glink is the creator of an 18-part webinar+ebook series called “The Intentional Investor: How to Be Wildly Successful in Real Estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.