Are you and your spouse holding real estate in a trust as a married couple? Or you are planning to, someday in the future? There are different ways to go about this, so today we’re going to talk about the method we use here at Parks & Jones and the benefits of our method. This way, if you are planning on holding real estate in a trust and you are married (or will soon be married), you can better understand our process and reasoning. So please, read on to learn more.
Holding Real Estate in a Trust as a Married Couple
Here at Parks & Jones, we handle married couple’s real estate in a special way. Our married clients sign what is called a “Deed and Acknowledgement,” which transfers their Missouri real estate into their trust (or trusts). In Missouri, a deed is valid upon “acceptance” by the trustee into the trust. Therefore, for transfer purposes, our clients’ real estate is transferred into their trust when they sign the “Deed and Acknowledgement” accepting the real estate into their trust(s). However, we do not record the deed at the Recorder’s office until the first spouse passes away. This way, the real estate still avoids probate and the wishes of both spouses are still accomplished. If you are holding real estate in a trust as a married couple, we would like you to follow this technique for two important reasons: 1. ADDED PROTECTION. Several years ago, a Missouri court determined the creditor protection a married couple receives by owning property as “husband and wife, tenants by entirety” is lost when real estate is transferred into a revocable living trust. The appellate court ended up overturning the trial court’s ruling on this (as they should have), so the protection was maintained. However, the fact that an attorney was able to challenge this matter and win (albeit for a short period of time) makes us want to ensure the heightened protection given to married couples is never challenged or lost again. We accomplish this through the “Deed and Acknowledgement” because if a client is sued, the real estate will show it is owned by “husband and wife, tenants by entirety.” 2. AVOID COMPLICATED RE-FINANCING AND LOANS. If a client wants to re-finance or take out a loan on their real estate and the real estate is owned in their revocable living trust, the bank will require the client to pull the real estate out of the trust for the re-finance and/or loan process. Afterward, they will have to transfer the real estate back into the trust. This requires two extra deeds to be created, and it requires the trust documents to be disclosed to the lender. However, if the bank believes the real estate is owned in the clients’ names as husband and wife, then nothing has to be reported or disclosed to the lender. Over the course of the client’s life, this will result in significantly fewer headaches when obtaining financing on real estate.
NOTE: Because this method delays the recording of the deed at the Recorder’s office, our clients sometimes express concern that their real estate is not truly owned in their trust. Rest assured that it is there, despite what the Recorder’s office might say!
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This is the general method we follow when a married client is holding real estate in a trust. However, estate planning is a complicated process and there are exceptions to the rule. If you are planning to purchase new real estate or have questions about your existing real estate, please feel free to contact the attorneys at Parks & Jones. We would be happy to discuss how holding real estate in a trust should be handled.