Put house in trust to keep heirs at peace

Money Talk

Your Money

August 22, 2004|By MATT LUBANKO

My husband and I have children from prior marriages. We are wondering how we should title our home so the children inherit our respective shares. Currently it is titled joint tenancy with right of survivorship.

How do we change the way our home is titled? What fees could we expect to pay if we were to make these changes? What might the tax consequences be?

- F.B. DeBary, Fla.

If it's safe to assume your financial life is simple, here's a simple solution: Put your home into a trust, with you and your husband listed as trustees.

The home can be titled in the name of the trust. There are no tax consequences for making this change in the title.

The legal bills for creating this trust would range from $1,000 to $3,000, depending on several factors: the estate-planning lawyer you hire, the assets you place in the trust and the methods you choose to distribute your property after you both die.

Most of all, the trust could grant your wishes - passing on equal shares of your marital home to children from different marriages - without binding you or your husband to an agreement you might later wish to change.

"A living trust is flexible, and it doesn't have to be all that complicated," said John Pierce, an estate-planning attorney with Pierce & Klein PLC in Orlando, Fla.

To make the trust work, you have to appoint a "successor trustee" - a person willing to carry out your posthumous wishes. This job includes paying bills, taxes or debts your estate leaves behind. A successor trustee also ensures that your beneficiaries (such as your children) receive the property (including your home) that you leave after you die.

Looking ahead, you should also understand the pitfalls of leaving a home (or another relatively illiquid but valuable asset) to multiple beneficiaries.

"All might have to sign off on the sale of that home. That can get complicated if one doesn't want to sell," Pierce said. To guard against interfamily fights, it's sometimes a good idea to grant power of attorney to one beneficiary to sell the home - with each beneficiary to receive apportioned shares of cash after that sale is completed.

It's also wise to understand that estate planning can be an extremely complicated, detail-oriented task.

You can cut down on legal fees by identifying your assets, naming your beneficiaries (including all pertinent information such as legal names, addresses and Social Security numbers), and spelling out - for your lawyer - how and to whom you wish to bequeath your property.

But you're not likely to complete this job without first interviewing, then hiring, a lawyer you trust.

Consult the Web sites www.nolo.com, www.abanet.org, and www.aaepa.com for help. Buy or borrow the book Plan Your Estate by Denis Clifford and Cora Jordan (Nolo Press) for help in learning the basics.

My husband and I expect to complete our divorce proceedings before the end of 2004. Can we, because we were married for most of 2004, still file a joint income tax return?

- K.N., Middletown, Conn.

No. The Internal Revenue Service rules that govern your filing status are pretty simple. Your filing status at the end of the year is your filing status for that year, said Anne Perkins, a certified public accountant with Mercik, Kuczarski & Bolduc LLC in Enfield, Conn.

If you wish to preserve your married-filing-jointly status for another year, you must postpone your divorce until January.

Matthew Lubanko is a columnist for The Hartford Courant, a Tribune Publishing newspaper. E-mail him at yourmoney@tribune.com.

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