Living Trust or no?

My wife says we need a living trust to protect our assets.
Married for 54 years and had will in Florida. Moved to Alabama and wife says will is not enough. I’m not sure we need either. We have a home and several CD’s and checking and savings and a TSP account. We have 1 daughter and she is the beneficiary of all accounts. The home is my concern, how do we pass the home on without probate? Can we add her to the deed or do we need a trust or a simple will? Thanks!

If you add her to the deed, her basis when she sells is your basis when you bought (plus improvements, etc). If she acquires the house at the time of your death, her basis is the value at the time the last one of you dies. If you expect the home to appreciate, she’ll owe income tax on that difference.

It looks like “Alabama does not allow real estate to be transferred with transfer-on-death deeds.” Assuming that’s accurate (I have no idea) your house would be transferred via a will or trust, or if you don’t have either, via state intestacy law.

If you aren’t concerned with what your daughter will do with your assets after you die, a will might be ok for your needs. But as far as I can tell, your estate will have to go through probate, and she won’t be able to sell until that’s over. Titling the house (and whatever else you have) in the name of a trust should avoid probate, but is more expensive to set up. Probate is also public, so if you value your and her privacy, a trust is helpful.

In any event, a lawyer is your best bet to figure out what you need. I know that’s not what you want to hear, but it’s probably cheaper than the income tax you’d cause your daughter to have to pay if you add her name to the title of the house (unless you die soon).

In Cal, that can take months, even years [according to my RE Broker friend who handles these all the time] And here, ave cost of probate is $13,500.

But that’s a number I learned a few years back. Probably more now.

Thank you for your reply!

Thank you!

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I don’t think it possible to avoid probate in Arizona, but the cost of probate is fairly negligible. And the state requires that it be completed in two years or less. Probate in Texas is also fairly inexpensive, although it seemed more expensive, but that could be the difference in attorney fees. You need to investigate the local requirements and costs.

In Cal, I’ve been told probate attys are a borderline scam. The atty passes it to low paid clerks who charge full atty billable hours. The costs skyrocket as the hours multiply while they check every possible search to determine if there are minor children anywhere or any outstanding debt. It goes on and on and on…

Yikes! In the three probates ive handled, we dealt directly with the attorneys, and there were no investigators. In both states a notice of the death had to be published, and requests (not sure that is the right word) for claims against the estate to be forwarded to the attorney’s office. In most cases billing simply went on as usual. There is a finite time after publication that claims are allowed. That said, we did pay all legitimate and reasonable bills, even some that were outside that allowed time (my mother’s medical bills continued to come in periodically for several years…most of which had already been paid…and thise we ignored).

Cost in Texas was higher for less complicated estate, but I suspect it was a difference in attorney fees, but they did all include probate costs.

First do get a will in GA., each state has different laws. Next make sure your daughter is the the beneficiary after both of you have passed, if not one can be left out in the cold. As for the house, check out a life estate. Basically ownership stays with you upon death it goes to your heirs at a stepped up value with no probate. There can be some issues but typically not. Do see an elder care/ estate and don’t forget to update your will

A life estate can be tricky. It is typically irreversible and legal ownership changes upon signing the deed. If the daughter were to predecease the parent(s) her heir would inherit her position in that life estate deed.

That could turn out to be averse to the married couple’s wishes.

I can’t speak for all states, but this is generally not true (not true in Alabama based on web sites I read). Legal ownership does not change on creation of a life estate. The owner who grants a life estate remains the owner with full rights and obligations of an owner. The person granted the life estate is frequently called the remainderman. The remainderman holds a property interest that has not yet vested, so it is not a current property interest. I know of nothing that would preclude the owner from later retitling the property with no, or a different life estate (except, perhaps, a separate agreement where the remainderman gave the owner something of value in exchange for the life estate).

Thanks to all for your replies!

True but typically not, they plan on passing all to the daugther anyway. Needless to say anything messy would happen after passing. It’s an option but elder care attorney would be able to lay it out. That may lead them into a discussion of nursing home care as well. Best of luck

I think, that if you peel back the onion skins, you’ll find that deeded ownership has to change in order to accommodate the reliable transfer of real ownership upon the death of the occupant of the property.

Even looking at it the way you suggest that it is in Alabama, the deed would change from the current occupant(s) alone to the daughter sharing ownership with the parents. That would be a change of ownership.

But while it may be convenient to think of a life estate as true real property ownership by the parents, it is not. The property will, in every case I’ve ever seen, be deeded over to the person, (the daughter in this case,) granting a leasehold for life to the intended lessees, in this case, the parents.

When that happens, the parents are no longer exclusive owners of the property. They have a vested interest in the property in the form of a lease for life. A lease is personal property and a deed guarantees ownership of real property. That means that they cannot sell or encumber the real property as though they owned it. The only way to terminate the life estate prior to the death of a surviving lessee is to have agreement of all the signers of the life estate, including the daughter… or her heir should she predecease her parents… agree to it.

So the tricky part that I mentioned in a prior post comes when the situation of the the lessor of the life estate (who is the owner of the subject real property,) has a change in circumstance, (gets married, incapacitated, divorced or dies.)

Then things get really interesting… :nerd_face:

There is absolutely no leasehold involved. The person granting the life estate remains the full owner of the property until death. The person granted a life estate has a future interest in the property that has not yet vested. They have no current legal or property interest and their life estate can be terminated prior to the grantor’s death. That’s pretty much black letter law, unless a state has added other quirks or the grantee of the life estate has given consideration in exchange for receiving a life estate. There is nothing very tricky about it.

I went to elderlawalabama.com and it states the following information concerning a Life Estate Deed in Alabama:

What are the pros and cons of creating a life estate deed?
Let’s talk about the cons first. One of the biggest issues that can arise from a life estate deed is the fact that neither the life tenant, nor the remainderman, may sell the property without the other’s consent. What does that mean? If you, as the life tenant, wish to retire to Florida and need to sell your home in order to do so, you’ll have to get your remainderman to agree to sign off on the sale. And that’s a little more complicated than it actually sounds. When you sell a home in a life estate, your remainderman actually owns a percentage of the property. The older you get, the more the remainderman’s interest grows. Theoretically, two checks will be issued at closing: one to you as the life tenant, and one to your remainderman. An elder law attorney or CPA should be able to help you calculate what that percentage will be. It is based on the age of the life tenant and their life expectancy. Another con to consider is what happens if your beneficiary pre-deceases you? You very well could end up co-owning your property with someone you never intended to, and you can’t force them to sign their interest back over to you. Lastly, if you have a falling out with someone you have already given a life estate to, it can be extremely difficult to undo. Again, you cannot force a remainderman to give back their interest.

Now let’s discuss the good things about them. There are several HUGE advantages to creating a life estate deed. First, they are great to use to avoid formal probate for your property, which can save your family thousands of dollars in legal fees and make it much, much easier to deal with after your death. A lesser known, but still huge, advantage is that creating a life estate deed will protect your home or property from a Medicaid spenddown, so long as it has been in the life estate for at least 5 years before a Medicaid application is necessary. This can keep your family farm or family home from having a lien placed on it, or forcing your family to sell it to pay for your long-term care. And last, but certainly not least, we’ve already talked about the tax advantages in creating a life estate versus outright adding someone to your deed.