I am divorcing my wife, I will probably put the house on a trust for my child. Can someone explain to me the benefits? How does a trust works. I know very little about trusts.
Estate Planning Attorney
I will start by explaining the basic elements of a trust. If property is owned by the trust, then the Trustee (one individual or entity) manages the property for the benefit of one or more Beneficiaries (other individuals or entities). You can determine the terms of the trust -- for example, when the house will be sold, who can live in it, etc.
There are various benefits to placing property into a trust. For example, in the case of a child, that child cannot legally own property. If anything were to happen to you and the property passed directly to your child, then the court would have to appoint a guardian to oversee the property -- that is expensive and cumbersome. Placing the property in trust avoids that.
The two basic types of trusts are "revocable" and "irrevocable." If it is irrevocable, then the terms of the trust cannot be amended by you. If it is revocable, then you can still control the property.
But there are disadvantages. In particular, under most circumstances, a trust cannot take advantage of the capital gains exemption that an individual has -- have a look at this blog post:
A trust can also be a tool for managing complex assets and gifts: put certain pieces of property into a trust, and when you pass away, there is no need for probate -- the trust already owns it, and it determines how the property will be managed in the future. See this blog post for more information: http://nationalwillrepository.com/2012/08/trust-benefits-complex-assets/
But the trust is cumbersome. You should think about the benefits before placing the property into a trust. A lawyer might help you consider the particular benefits in the context of your divorce.
I am licensed to practice law in Virginia. Please note that this answer does not constitute legal advice, and should not be relied on, as each situation is fact specific, and it is not possible to evaluate a legal problem without a comprehensive consultation and review of all the facts and court pleadings filed in the case. This answer does not create an attorney-client relationship.
I agree with Attorney Murphy, in general, but I would disagree that a trust is cumbersome. Most trusts are very easy to manage, and the people you deal with are very familiar with them and how to handle them. You do not say how old your child is, but if he/she is a minor, then a trust is absolutely the best planning tool to take care of his/her inheritance. It provides for flexible distribution to the child, protection from creditors and your ex getting control of the assets, and probate avoidance. It is a private arrangement between you and your trustee and the beneficiaries. No one else needs to know who is getting what, or when they are getting it.
I have material on my website about the use of trusts, which might be of general interest to you. But you really need to consult with a Florida trust attorney to assist you. This is definitely not a do-it-yourself project.
Best of luck to you as you deal with these challenges!
*** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.
Estate Planning Attorney
One of the biggest advantages of placing your home or any asset in a Trust, is the Trust will avoid probate. If you child is a minor when he/she inherits the home, the trustee can manage the property (pay taxes, maintain the property, ect.) until your child is able to do so on their own. Also, should the property need to be sold, the trustee will handle the sale and place the proceeds in the Trust until you child reaches a predetermined age.
Whenever a minor is involved, it is best that they inherit assets via a trust. Most people at 25, let alone 18, are not mentally or financially knowledgeable enough to handle a large ($50,000 or more) lump sum of money. Since you are having a Trust drafted, I also recommend that any and all potential inheritance, including life insurance and retirement accounts, be held in trust for the benefit of the child.
If you would like additional assistance, please call my office.
This answer is provided for informational purposes only, does not constitute legal advice, and does not create an attorney-client relationship. Florida Attorney practicing in areas of Estate Planning, Elder Law, Trusts, Probate, Guardianship, and Business Law. www.ferraezlucas.com The information provided is for educational purposes and not intended to provide legal advice or to create an attorney client relationship. Please contact me at email@example.com or call my office should you like to discuss your Florida legal matter further. Actual legal advice can only be provided after completing a comprehensive consultation in which all of the relevant facts are discussed and reviewed.
Estate Planning Attorney
Your question asks about placing the house in a trust "during" the divorce.
You would not be able to place the Florida homestead in a trust without
a pre or post marital agreement or a marital settlement agreement.
The answer given does not imply that an attorney-client relationship has been established and your best course of action is to have legal representation in this matter.