What You Need to Know About Living Trusts with Karnopp & Petersen’s Erin McDonald

House Talk Episode 22 – What You Need to Know About Living Trusts with Karnopp & Petersen’s Erin McDonald

Karen Malanga: Hi this is Karen Malanga with another edition of House talk.

I have Erin McDonald here today, and I asked her to come specifically because she’s helped me in the past on several real estate transactions. And each transaction, we’ve been selling a home that family members have inherited.

We get into the marketing. All of a sudden, we get an offer, and then—oops, the home isn’t in the family trust. And now, it’s going to be having to go through the probate system in Oregon.

Erin is an attorney at Karnopp & Petersen, and this is one of her areas of expertise.

So, Erin, can you explain the process on how maybe families could better prepare themselves when a home is inherited? What would the steps be to prevent homes going into probate?

Erin McDonald: Sure. So, Karen, first, thanks for having me today. This is something that we see frequently. You have a family who inherits a home, and they don’t understand how the asset is titled. They step in ready to sell the home and then they realize that it’s titled in the decedent’s name.

And so, one of the ways to avoid that is by using what’s called a Revocable Living Trust. So, it will be something that the decedent would have to set up during lifetime. And technically, they transfer ownership into the name of the revocable living trust.

The benefit for doing that is that when they pass away, they asset is not titled in the decedent’s name. It’s titled in the trust name. And by operation of the trust agreement, there’s a successor trustee who can step in and sell the real estate without having to seek court approval.

When the real estate is titled in just the decedent’s name, not in a revocable trust, then we’re forced to probate the asset, which means opening a court proceeding and following very specific steps as outlined in Oregon Statute.

So, really, the benefit of using a revocable living trust is that we’re able to avoid having the lengthy and costly probate before we can distribute the estate.

I will say that in a probate, if you do have a situation where you have a decedent who has passed away and you have a real estate asset that’s titled in their name, we can move very quickly to get a personal representative appointed—which we’ve done in several transactions with you, Karen.

We can get that person appointed quickly to close on the transaction. But what the family has to realize is that you have to go through a number of steps to be able to actually distribute the sale proceeds. And the revocable living trust would circumvent all of that.

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Karen: So, I would think then that it would be really who, families, when someone is getting older and still living in their home or maintaining this primary residence or asset that the future members of the family will possibly inherit, that they set up a revocable living trust or at least come in and meet with you because it would save all this.

I know, like the situations you’ve mentioned, you really did save us. And I actually remember, we did close on a property and those funds were held and couldn’t be distributed to the family immediately. And all that could’ve been circumvented by just simply visiting you.

Erin: Yes. And so, we work with families at all sorts of different stages. And ideally, we work with a family when mom or dad has aged, but still has capacity. The family can come in and we can put a plan in place.

And it’s not just probate avoidance, but it’s also incapacity planning.

So, mom and dad have a home, and mom and dad need to move into assisted-living and have no capacity.

Karen: Yes.

Erin: How are we going to be able to close on a transaction where they need to sell their home when they’re making this transition? If they had done advanced planning, we’d have a power of attorney in place and likely a revocable living trust. The son or daughter would be able to sell home for mom and dad while they’re still living, and they’re transitioning into assisted-living.

So, it’s not just avoiding probate on death, but it’s also making being able to transition some of that decision-making while mom and dad are still living. That’s also important.

Karen: And while they can make good decisions?

Erin: Yes, absolutely. Because once mom and dad have crossed a threshold and can’t make their own decisions, then we have limited options.

Karen: So, that’s so important…

Erin: Absolutely.

Karen: …to take care of these things, I know. And sometimes, a year goes by and you think, “Oh, I’ll do this.” I’ve been guilty of that with you as well. I need to sit down and finish my own revocable living trust with you, and you’ve been very patient with me. So, Erin, what’s the best way to reach you?

Erin: The best way to reach me is either by email or phone. My email is ekm@karnopp.com—spelled K-A-R-N-O-P-P.com—or or by phone, (541) 382-3011.

Karen: Thank you so much, Erin, for being here today.

Erin: Thanks, Karen.

 

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