Please help me understand the benefits and differences between a living trust (for a property) vs. having a name on the property deed.
May 29, 2012 3:14 PM   Subscribe

What's the benefit of having a living trust for a property over having my name on the property deed?

I will soon file a quitdeed claim to change the names on the deed of my primary residence from 2 people to my name only in California.

My tax preparer, who is also an estate planner, suggests opening a living trust for the property (my primary residence). His reasoning is that it protects the property from lawsuits or creditors. I'm in my early 30s, unmarried, no children, good credit. At this moment, I'm not concerned with who will get the property when I die.

Does his suggestion make any sense at all? If a living trust protects the property from lawsuits or creditors, why doesn't everybody have their house in one?

AFAIK, filing a quitdeed claim costs less than $100, while opening a living trust potentially costs a couple thousand.
posted by elif to Law & Government (6 answers total)
Q: Does a living trust protect property from creditors?
A: (Shortened version) No.
posted by erst at 4:01 PM on May 29, 2012

A living trust circumvents inheritance taxes for your heirs (e.g. your heirs continue to operate your home under the trust agreement, without paying income/inheritance taxes on same.)
posted by Short Attention Sp at 6:11 PM on May 29, 2012

Never take legal advice from anonymous comments on the internet. For example, the immediately preceding answer is simply wrong.

You need to talk to a lawyer licensed in California to review the specifics of your proposed transaction. Traditionally, your intuition would be correct: you couldn't protect property from creditors by transferring it from yourself, individually, to yourself, as trustee, for yourself, as beneficiary. However, some states have passed statutes that permit some amount of asset protection in self-settled trusts, so it's not as clear as it once was. Google "asset protection trust" for some more general information.

As far as I know, California has not passed such a statute, and my entirely-not-legal-advice opinion is that I doubt whether such a thing would work to protect real property located in California. But then my opinion is neither here nor there. Consult with an attorney if you want answers.
posted by lex mercatoria at 6:52 PM on May 29, 2012 [1 favorite]

I don't see it myself. Follow Lex's recommendation to get concrete advice.

Filing a quit-claim deed (proper terminology) simply means changing the ownership of record. Someone will be giving up part ownership. It happens. But saying "filing a quitdeed claim costs less than $100, while opening a living trust potentially costs a couple thousand" is like comparing apples to bicycle tires. The purpose is altogether different.

A trust is a vehicle for ownership, to accomplish certain goals. They are not likely to be your goals at this point, based on what you have told us. If the need arises, in the future, this step can be taken at pretty much any time.
posted by yclipse at 7:56 PM on May 29, 2012

Most probate/estate attorneys will offer you a free half hour consultation. This is way better than listening to strangers on the internet or a "tax preparer" who is not licensed to practice law.
posted by nestor_makhno at 2:24 AM on May 30, 2012

I believe the only way a trust can "protect" you from creditors is if they are particularly lazy about it. If they search land records, they won't see your name on title to any land. Or if they search on your name, they will just see that you are the beneficiary of trust# 1234545, rather than the owner of property X. If they just give up at that point, then I suppose it will work.

But they wouldn't give up. If they see that you are the beneficiary of the trust, they are going to want to find out what's in the trust so they can get their hands on it. Especially if they see that one day you own a property, and the next day you are beneficiary of a trust.

Trusts are just a layer of abstraction for holding title to property. You are just paying some bank's trust department to hold your stuff in their name instead of yours, plus instructions to them as to what to do with your property should some specified event occur. Sort of like an escrow account.
posted by gjc at 6:19 AM on May 30, 2012

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