In our last post, we began looking at how one can use trusts to protect real estate as part of the estate planning process. We already looked very briefly at irrevocable trusts, particularly Qualified Personal Residence Trusts, and the advantages they offer.
Revocable trusts have their own distinct advantages for protecting real estate. As we noted, the terms of the trust can be changed at any time. They also allow assets to avoid probate, which can be a costly and cumbersome process in many states. Irrevocable trusts also protect the privacy of property and beneficiaries, since they are not on public record as wills are in the probate process.
Revocable trusts are very flexible, and may be very beneficial for those who own property in multiple states and who want to avoid probate in each of those states. When a revocable trust is established, it will be specifically tailored to each family situation and the goals of the one planning the estate. One option with these trusts is to establish a trust that spans multiple generations. These so-called "dynasty" trusts, when properly structured, allow families to pass on wealth to successive generations without incurring estate taxes.
Setting up a limited liability company is yet another option, particularly for those who own income-producing property. Because LLC's deflect liability away from the owner's personal assets and to the LLC itself, they reduce a property owner's personal liability in the event of a lawsuit. In addition, LLC allow for greater privacy since only the company name is listed in public databases.
Regardless of which of these options one chooses to go with in one's estate plan, it is important to ensure that the estate plan itself fits one's family and personal goals. Working with a qualified estate planning attorney is the best way to do this.
Source: Reuters, "Weighing the what-ifs of trusts and LLCs," Beth Pinsker Gladstone, May 3, 2012