A will, living trust and power of attorney are all useful documents to have in your estate plan. Which documents are right for you can depend on your situation and the size of your estate.
Q: I would like to express my appreciation to you for your reply and guidance to a previous question some months back, about the documents that I needed to obtain from my mortgage company upon payoff of my mortgage.
I followed your advice step-by-step, and at this time, a few months after our mortgage payoff, I am still receiving some of the documents that I need, but they keep coming (very slowly). I would not have known what to ask for without your guidance and help.
I have another question for you that has been in my mind especially now that we have finished paying our mortgage. I read somewhere that it is important to have a “will” and a “living trust” if you own property. We already have a “will”, but is it necessary to obtain a living trust as well?
My husband and I are both retired, hold the house as joint tenants with rights of survivorship, and would like to eventually sell the house and move to a smaller one. We do not want having the trust to interfere in any way in our ability to sell our property.
Also, do you suggest we have a “power of attorney” for each of us, just in case we are incapacitated by an illness, so that the other spouse can sell the house, etc.?
A: It’s good to know that you have a will in place. While owning the property in joint tenancy with rights of survivorship helps either of you in case the other dies — either of you would become the sole owner of the home should the other die — your will kicks when it comes to the property after both of you die.
Having said that, depending on the size of your estate, using the will to go through probate can be expensive. Once the last of the two of you have died, the executor of that will would go to court and get recognized by the court as the representative of the estate. When it comes time to sell the property, the contract and other proof of what the home is worth might have to be given to the court for the court to authorize the sale of the home. If the probate court allows for the executor to act without court authority, the executor can sell without giving documentation to the court about the pending sale. Eventually, the executor of the estate must present an accounting to the court of all distributions made by the executor to close the estate.
That’s the nutshell for going through probate. To avoid probate people usually put their properties in a living trust. You pay upfront to set up the trust and then transfer title of your real estate and other property to the trust. Upon the death of the owner of the trust, a successor owner is appointed in the documents and you don’t have to go through probate to do anything.
For some people having the living trust is quite worthwhile and in the long run a great money saver. For others, the expense that you pay today for the trust may not outweigh the costs of probate, if any, down the line.
A power of attorney would be quite a useful tool to take care of financial matters should one or the other of you find yourselves incapacitated. Powers of attorney for financial matters are not expensive to draw up and can save quite a bit of stress and headaches. Yes, we strongly recommend that you have these documents in place.
We appreciate your kind words about our response to you on how to obtain documents from a prior lender on your home. It sometimes takes quite a while to get all the paperwork together. Keep on top of it and make sure you get everything you need. The most important piece is the release of mortgage or release of trust deed, then the cancelled note and cancelled mortgage. And don’t forget to cancel having your lender as an additional insured on your homeowner’s insurance policy.