Saturday, November 22, 2014

What Is the Difference Between a Living Trust and a Life Estate in Real Estate Investing?

Both a living trust and a life trust are legal documents that are designed to facilitate financial planning for a homeowner. They are also both designed to aid in the seamless transfer of a property after the death of a beneficiary of these trusts.

A living trust is a document that is designed to avoid probate and allow the beneficiary(s) to control the destiny of the assets in the trust even after the death of the beneficiary. Essentially, the beneficiary, who is usually also the trustee, can determine the distribution of the assets or their liquidation and the proceeds distributed figuratively from the "grave".

By avoiding probate, the beneficiary can save a lot of money and probate battles between wannabe heirs. These probates can be very lengthy and even take many years to resolve. Between estate taxes and attorneys' fees, many estates lose 30% - 60% of their value before the liquidated assets are disbursed to the proper heirs as determined by the court.

Possibly more important to the beneficiaries of these living trusts, is the assets of the trust are not shown in the public record as with simple probated wills. The trust must pay income taxes and estates taxes and the trust does not save the beneficiaries any money in these areas.

Finally, in the event the trustee (beneficiary) is incapacitated, the trust contains language so a new trustee can be installed without a court order and this new trustee can take appropriate action with regard to the medical condition of a beneficiary. This avoids having to get a court order for a medical procedure which could take so long that the patient could die - or live an unreasonable time.

The life estate is also a legal document that is actually a special deed to a property that titles the property in such a manner that when the owner of the property dies, the additionally named individual on the deed automatically becomes the new owner as soon as the former primary owner's death certificate is filed in the public record. This instrument also bypasses the probate process but does not avoid any Federal estate taxes due.

The difference in the living trusts and the life estate is that the living trust is a document that contains specific instructions for a trustee in the manner and disbursement of many assets owned by the beneficiary of the trust. The property remains in the trust with a different trustee until the terms of the trust instrument are carried out by the trustee.

The life state is simply a special deed that conveys a single property from a primary owner to a second person when the primary owner is deceased and the death certificate is filed in the Clerk of the Court's public records. Both instruments bypass the probate process.

Dave Dinkel has over 40 years experience in Real Estate Investing which has given him a unique perspective into the Real Estate Market. Learn the "No Money, No Credit, No Risk" proven methods of today's successful Real Estate Investors. Visit America's Online Real Estate Investing Association created by Dave Dinkel to get you started as a Real Estate Investor today! Click the link Now http://www.AOREIA.com
Article Source: http://EzineArticles.com/?expert=Dave_Dinkel

Article Source: http://EzineArticles.com/6690147

No comments:

Post a Comment