That’s a common question for estate planning clients, and the answer is generally yes, a trust can acquire new real estate holdings after your death, but it depends heavily on how the trust is structured and the powers granted to the trustee.
What happens to assets in a Revocable Living Trust after death?
Typically, a revocable living trust functions by holding assets during your lifetime and distributing them according to your instructions after your passing. However, the trust document itself doesn’t automatically cease to exist upon your death; it continues as a legal entity. The trustee, whether it’s a family member, a friend, or a professional like myself, Ted Cook, an Estate Planning Attorney in San Diego, is empowered to manage the trust assets—including the ability to sell existing properties or, crucially, purchase new ones. This power must be explicitly stated within the trust document. Without that specific authorization, the trustee’s hands are tied. Approximately 60% of Americans do not have a properly executed estate plan, which often leaves assets vulnerable and subject to probate.
Is a ‘Pour-Over Will’ necessary even with a Trust?
A “pour-over will” acts as a safety net, directing any assets *not* already held within the trust to be transferred into it upon your death. This is important because, realistically, it’s difficult to transfer *every* asset into the trust during your lifetime. Let’s say you inherit a property a few months before you pass away – that property might not be titled in the name of the trust. The pour-over will ensures it still becomes part of the trust estate. Having a trust with a pour-over will also allows for greater flexibility; the trustee can use the assets within the trust—including funds from previously held real estate—to purchase new properties. This is especially useful if the trust’s beneficiaries are to receive income from real estate holdings long after your passing.
What happens if the Trust document doesn’t authorize new purchases?
I once represented a client, Eleanor, a vibrant woman who meticulously built a rental property portfolio. She had a trust, but it lacked specific language authorizing the trustee to acquire additional properties. After her death, her daughter, acting as trustee, identified a promising investment property. However, because the trust document didn’t explicitly allow for new purchases, she faced a legal roadblock. She had to petition the probate court for permission, which involved delays, legal fees, and a frustrating bureaucratic process. Ultimately, she got approval, but it cost her time and money, and she missed out on a good deal. It’s estimated that probate can consume 5-7% of the estate’s value in fees and costs.
How can I ensure my trust allows for future real estate acquisitions?
Fortunately, this is easily avoidable. When drafting your trust, we, at Ted Cook Law, specifically include language granting the trustee the power to purchase, sell, and manage real estate, even after your death. I recently worked with the Henderson family, who were concerned about providing for their grandchildren’s education. They wanted the trust to be able to continue investing in income-producing properties to fund future tuition costs. We crafted a trust that allowed the trustee to not only maintain their existing rental properties but also to strategically acquire new ones as opportunities arose. This ensured a sustainable income stream for generations to come. The trustee, guided by their investment strategy, purchased a small commercial building that generated enough rental income to cover the grandchildren’s college funds, a seamless transfer of wealth achieved through careful planning. A well-drafted trust provides peace of mind, knowing that your assets will be managed according to your wishes, even after you’re gone.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
Map To Point Loma Estate Planning Law, APC, a estate planning attorney near me: https://maps.app.goo.gl/JiHkjNg9VFGA44tf9
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About Point Loma Estate Planning:
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