Q: Considering placing house in trust to prevent inheritance by spouse's family.
Married in 2013. Home in Kansas was purchased later that year for approx $125k, using funds exclusively from wife. This is the residence. Currently worth approx $150k.
Wife wishes that upon her death, husband is allowed to stay in the home until no longer needed, then it is to pass on to charity. Wife wishes to also provide for care of her pets.
We think a trust would prevent anyone from altering wishes after her passing. Is this true?
If home were placed in trust now, with Wife as trustee, how does that affect purchasing insurance? Property taxes? Liability? Income tax?
BTW, Husband is in agreement with all this.
A:
It would be possible for a husband and wife to transfer their residence to the wife as trustee under a revocable living trust established by her and naming her as the initial trustee. The trust could provide for the husband to have the right to live in the house during his lifetime. Mortgage and insurance companies are familiar with trusts and the change should not cause a problem. There should not be a tax effect, either income or property tax.
The trust could be designed to become irrevocable upon the wife's passing. Subject to the power of the probate court to possibly compel assets from the trust to be replaced into the probate estate, the assets in the trust should pass as provided for in the trust. The house being the homestead of the husband, he would be afforded protections from creditor and beneficiary claims. The husband could live in the house and it could later pass as the wife has provided in the trust.
You should have the benefit of an attorney's assistance in assembling your estate plan. There are steps that, if missed, could defeat your intended plan.
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