Wills, Trusts, and Closets: What Happens to Everything In an Inherited Home?

For many families, the home is the most valuable asset passed to the next generation. Estate planning for a home usually involves transferring it in one of two ways: through a will, which requires probate — a public, court-supervised process that takes time and money — or through a trust, which bypasses probate entirely and gives heirs faster, private access to the property. But whether the transfer is handled by a will or a trust, there’s one step that almost nobody puts in the estate plan: cleaning out the closets.

Before heirs can use, rent, or sell an inherited home, someone has to deal with everything inside it — paperwork, financial information, decades of furniture, clothing, keepsakes, and miscellaneous stuff accumulated over a lifetime. It’s one of the most emotionally taxing and time-consuming parts of inheriting a home, and it’s almost never discussed alongside the legal planning. So as you think about estate planning and the family home, don’t forget to ask: what happens to everything in it?

Don’t Leave A Mess

When it comes to estate planning, it turns out that we must apply the same lesson to ourselves that we have tried to instill in the younger generations of our family: no one really wants to clean up a mess left by others. Indeed, attorneys observe that the majority of their estate planning clients have the goal of leaving affairs well ordered for their adult children and other loved ones. Establishing a trust and or a will goes a long way toward making sure assets, like the family home, are cleanly passed along to the next generation. However, as important as a clearly made and well communicated estate plan is, it turns out that clean closets are helpful too, as Kristen Howe at Absolute Trust Counsel explains:

• I work with a lot of family-member trustees. Often it’s one child who is the designated trustee, and there’s a house the family has owned for many, many years. It’s full of Mom and Dad’s stuff, and the house has to be sold. Guess who gets the job of cleaning everything out? 
• That job falls on the trustee — and very often the other children won’t help. The trustee is stuck doing it alone, and she’s afraid that if she hires someone to help,…her siblings will complain about spending the money. It’s a lose-lose situation: the house has to be cleaned out…and…no one else is going to help….
• …The siblings want their inheritance right away. They don’t understand what a huge job being the trustee is, and they don’t know why it’s taking two months….It’s going to take six months, because the first three months go just to getting the house cleaned out.

When the goal of estate planning is to make things easier for those who survive us, it’s best not to stop after you have made a complete estate plan. Cleaning out closets (as well as the basement, attic and storage unit)  is a gift that is likely to leave your grown kids, grandkids and everyone else who loves you grateful for years to come. As Howe points out: “You might not get it all done, but every little thing you do is a big help. It will make things go faster, it will make it easier on the child you’ve chosen as trustee, and it will help your kids get along after you’re gone.” For more inspiration, consider the consequences of not including clean up while estate planning: 

I recently worked with a daughter trustee who walked into her parents’ house and was overwhelmed by how many boxes of paper there were — old tax returns, old bank statements, things nobody needs and nobody is ever going to look at, and boxes of books nobody had read in 40 years. She was tempted to just hire someone, bring a dumpster over, and start tossing. But she looked through one of the boxes and found $2,500 in cash in a box she thought was trash. Now she feels she has no choice but to go through every single box — and it’s a big job, because it’s a house full of stuff. I’m not talking about hoarding; this is just the normal stuff we all have.

Basics Of Passing Down The Family Home: Will or Trust?

A family home is often both the most valuable and emotionally significant asset in an estate. While many assume a will is enough to pass it on, utilizing a trust is generally the most efficient way to ensure a smooth transition to the next generation. The fundamental difference between these two estate planning tools comes down to how they handle the transfer of real estate:

• Wills Require Probate: A will must go through probate—a public, court-supervised process that can take months or years, during which time the home’s upkeep and equity may present issues. 
• Trusts Bypass Court: A revocable living trust transfers property directly to your heirs outside of court, keeping the process faster and private.

Typically, trusts also allow for more control and customization related to how a home is inherited. While a will can outline your basic wishes, a trust provides advanced, immediate control over how the home is managed after you pass. For example, within a trust document, you can specify and detail terms, including:

• Stipulating that the home cannot be sold without unanimous family agreement.
• Allowing one sibling to live in the home long-term while ensuring the others share in any future rental income or equity.
• Protecting the property from a beneficiary’s creditors or divorce settlements (by utilizing specific asset-protection trust clauses).

Summing up, it’s helpful to think of the difference between leaving the family home through a will or trust this way: a will states your wishes, but a trust executes them. However, a trust only works if it is properly “funded.” This means you must work with an estate planning attorney to legally transfer the home’s title (the deed) into the name of the trust. A trust left unfunded offers none of these protections.

Good To Know: Trustee and Trustee Bonds Explained

When you create a trust, you designate a trustee to administer it in accordance with the terms written in the trust document. Attorneys at Rutkin & Watkin explain that a trustee has legally binding fiduciary obligations and is “legally and ethically obligated to act in the best interests of the trust’s beneficiaries.” Given the seriousness of the role, the trust document (and sometimes courts) can require the trustee to obtain a trustee bond. 

A trustee bond (also known as a fiduciary bond) is a type of surety bond that serves as financial protection for the trust’s beneficiaries. The bond amount is typically set based on the value of the assets in the trust. While it is a common mistake to confuse trustee bonds with insurance, they operate in completely opposite directions:

• Insurance protects the policyholder from unexpected losses.
• A Surety Bond protects third parties (e.g. the beneficiaries of a trust) from the bond holder’s potential misconduct, negligence, or failure to perform. 

Here’s how trustee bonds work:

1. The Guarantee: A surety company guarantees the trustee will fulfill their legal duties honestly and competently.
2. The Claim: If the trustee causes financial harm to the estate through fraud, theft, or severe negligence, the surety company compensates the beneficiaries for their losses.
3. The Reimbursement: The surety company will then seek full reimbursement from the trustee’s personal assets.

Colonial Surety Company makes it easy and speedy for fiduciaries, including trustees, in every state to obtain their bonds, with these three steps: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere. Learn more and obtain a trustee bond here: Trustee Bonds 

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