Full question:
I have 5 rental properties that I want to place into a trust for future generations.What is the best legal structure for this?
- Category: Trusts
- Date:
- State: Arizona
Answer:
A trust can serve various purposes, including reducing tax liability, protecting assets, and preserving family wealth. By placing your rental properties into a trust, you can avoid probate delays and expenses, while providing for beneficiaries who may not manage their own affairs, such as young children or individuals with disabilities.
To establish a trust, you typically create a living trust through a Declaration of Trust. This document outlines the terms, including who will act as the Trustee. After creating the trust, you must transfer the properties into it, a process known as 'funding the trust.' This involves executing a deed that names the Trust as the Grantee and properly recording it, often using a warranty deed or quit claim deed.
Trusts can be revocable or irrevocable. A revocable living trust allows you to amend or revoke it during your lifetime, while an irrevocable trust cannot be changed once established. Irrevocable trusts may offer tax benefits, as the assets are removed from your taxable estate. Additionally, a testamentary trust can be created through a will, taking effect after your death, but it does not manage assets during your lifetime.
For your rental properties, a revocable living trust may be suitable, allowing you to retain control while ensuring the properties are managed according to your wishes after your passing. However, it’s crucial to consult a local attorney who can evaluate your specific situation and provide tailored advice.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.