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Trust ownership better than sharing house deeds?

Managing an estate early in life helps individuals leave a stronger legacy for children or descendants, but it's important to make well-educated decisions about transferring properties. Often, trust administration provides a safe way to manage wealth while living as well as transfer it after death to beneficiaries. For Pennsylvania residents, trusts may be a better option than dealing with partial ownership in a home, for example.

For numerous reasons, individuals may transfer partial or co-ownership of house deeds to others. Elderly parents may put children on the deed as a preparation measure or so they can assist with real estate issues. Adding individuals to the deed can put ownership at risk. Each person on the deed exposes the home to financial risk -- if anyone on the deed falls into financial trouble, the deed can be leveraged by companies looking to collect debt.

Adding someone else to a deed could impact a homeowner's ability to access options such as reverse mortgages. Transferring assets into someone else's name also impacts financial status, which could change Medicare eligibility.

Shared deeds could also negatively impact beneficiaries. Depending on the value of the home, beneficiaries may be susceptible to capital gains taxes. Probate issues also become more complicated when a beneficiary already owns partial interest in a property.

A revocable living trust can solve some of the problems inherent in deed sharing. Because the trust owns the property instead of one or more individuals, the deed is protected from creditors. There are also protections against taxes and probate issues put in place by a trust.

It's important to realize that life is full of change, and relationships often suffer from that change. Putting a deed in someone else's name can cause problems if feelings change. Since a living trust is revocable, individuals can make changes if circumstances demand it.


Source: 
Real Estate, "Before adding a loved one to a house deed, think hard first" Harvey S. Jacobs, Nov. 27, 2013

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