David A Walls PLLC Blog

Can you stay anonymous if you win the lottery?

Wed, 03 Sep 2025 13:52:23 GMT

So You Won the Lottery, Now What? A Lawyer's Advice on Protecting Your Winnings

Winning the lottery is a life-changing event, but the excitement can quickly turn to stress if you're not prepared. For those who win, the first few steps you take are critical to protecting your new-found wealth and privacy. We've compiled some key advice from David Walls, a lawyer who specializes in representing lottery winners , who was recently interviewed by Straight Arrow News.

1. Don't Tell Anyone

This is the most important first step, according to Walls. The desire to share the news with friends and family is strong, but telling people about your winnings can invite unwanted attention and complicate your life. Walls advises keeping the information completely private, at least initially.

2. Maintain Your Anonymity (If Possible)

Many lottery winners wish to remain anonymous, and whether you can or not depends heavily on your state's laws. Walls notes that "a lot of states have passed laws allowing anonymity to Powerball lottery winners," while others have "a modified system, and other states have no privacy laws at all with respect to winners." He strongly recommends consulting with an attorney immediately to understand the specific laws in your state and determine the best way to maintain your privacy.

This is also a key factor when it comes to signing your ticket. While some people may advise signing the ticket immediately as a form of protection, Walls prefers that winners "consult with an attorney about anonymity, privacy, all of those kinds of things before they determine how they’re going to sign the ticket."

3. Assemble a Team of Experts

Walls suggests that your first call after securing the ticket should be to an attorney. An attorney can help you navigate the legalities of claiming the prize and protecting your privacy. He also highlights the importance of having a tax expert and a financial advisor on your team. These professionals will help you manage the financial and tax implications of your winnings. Walls cautions that the initial amount of tax withheld is "oftentimes... not the correct amount," and that "everything you do with it [the money] is going to be taxed unless you carefully plan." Having a team of experts will help ensure you make the right financial decisions to protect your new assets for the long run.

Frequently Asked Questions

Q: Can I remain anonymous if I win the Powerball jackpot?

A: It depends on the state you are in. According to David Walls, a number of states have laws that allow lottery winners to remain anonymous. Other states have a modified system, and some have no privacy laws at all regarding lottery winners. Your first step should be to consult with an attorney to understand the specific laws in your state.

Q: What is the first thing I should do after winning?

A: The very first step is to not tell anyone about your win. After that, Walls suggests you should talk to an attorney as soon as possible about maintaining your privacy and anonymity.

Q: Should I sign the back of my winning ticket?

A: Before you do anything with the ticket, David Walls recommends you consult with an attorney to discuss anonymity and privacy. While some experts may have differing opinions, an attorney can help you decide how to handle the ticket to best protect your identity.

Q: What kind of team do I need to help me?

A: Walls advises assembling a team of at least three different professionals: a lawyer, a tax expert, and a financial advisor. This team will help you navigate the legal, financial, and tax complexities of your winnings.

Based on an article titled "Can you win the $1 billion lottery jackpot and stay anonymous? It depends!" by Lauren Keenan for Straight Arrow News, available at https://san.com/cc/can-you-win-the-1-billion-lottery-jackpot-and-stay-anonymous-it-depends/ .

Have a Harmonious Family that Does Not Fight? You Still Need an Estate Plan

Thu, 24 Apr 2025 12:00:23 GMT

In many families, everyone gets along, happily gathering for the holidays, sharing laughs, telling stories, and enjoying each other’s company. Then, the matriarch or patriarch dies. Suddenly, years of pent-up resentment and hurt feelings surface, and the once-happy family is now embroiled in litigation over the head of the family’s money and property.

Having an Estate Plan Is Crucial to Your Family’s Success

When everyone is alive and happy, it is easy to think that nothing will break a family apart. Many people think that since everyone gets along, estate planning is unnecessary because everyone will look out for one another and do only what is fair.

However, having a properly prepared estate plan is crucial. Failing to plan not only takes all the control out of your hands but can also leave hurt feelings and possible confusion over your true wishes. This confusion may force family members to pursue the only source available to resolve the misunderstanding: probate court.

Not Just Any Estate Plan Will Do

While a lack of planning can lead to disastrous consequences, poor planning can be just as harmful. Documents that are outdated, vague, or improperly prepared can lead family members to challenge them. Family members may have differing opinions about your intentions if your documents are unclear. This is especially unfortunate if you have a trust: one of the primary reasons to prepare a trust is to avoid court involvement. A trust contest, however, places your loved ones and the provisions in your trust under court scrutiny.

You May Be Able to Use a No-Contest Clause

If your documents are up-to-date and clearly state your intentions, but you worry that your decisions may displease your family, in some states you can include a no-contest clause that could help prevent or limit challenges to your will or trust. A no-contest clause is a provision that states that if a beneficiary contests your will or trust (whichever document contains the clause) and is unsuccessful, they will receive nothing. However, the effectiveness of no-contest clauses can vary by state, so if you think your family might contest your wishes, seeking an experienced estate planning attorney’s help is incredibly important.

A common situation where contests can arise is when someone is left out of the will or trust. If you want to disinherit a family member intentionally, consider leaving them a nominal amount at your death and using a no-contest clause, as these clauses apply only to named beneficiaries. The beneficiary has something to lose if their contest is unsuccessful, so this may discourage them from contesting your wishes in the first place. However, as previously mentioned, you need to work with an experienced estate planning attorney to ensure that this strategy is best for you based on your state’s law and your family’s situation.

You Can Protect an Inheritance with Proper Planning

Alternatively, if you are concerned about a beneficiary receiving money outright because of creditor issues, spending habits, etc., you need not disinherit or leave them out of your estate plan. Leaving money to a family member does not have to be an all-or-nothing decision. By utilizing a discretionary trust, you can set aside money for the individual to be distributed by a trustee when and how the trustee deems appropriate. If you do not want to put such tight restrictions on a beneficiary’s inheritance but still want a level of protection, you can have a beneficiary’s inheritance held in a trust and distributed to them at specific ages or when they reach certain milestones. You do not have to leave your loved one an inheritance outright without any requirements or stipulations.

A Proper Estate Plan Can Help Avoid Contests

Having a well-drafted, up-to-date estate plan is crucial regardless of your family situation. Will or trust contests can be costly and quickly drain what you want to leave behind for your loved ones. We can assist you in creating an estate plan that will ensure that your wishes are carried out and that harmony can be maintained within your family after you are gone. Call us today to schedule an appointment.

Don't Let Your Estate Plan Go Up in Smoke

Mon, 22 Jul 2024 20:46:42 GMT

Fewer people are creating estate plans today than in years past. Research shows that, in 2024, less than one-third of Americans report having a will. ^[1]

Every adult—whether they are 19 or 99—should have a will at a minimum. Many people can also benefit from estate planning documents such as trusts, powers of attorney, and advance directives. But even if you have created a comprehensive estate plan, it may no longer align with your objectives if it is not up to date.

Estate Planning Is Down

As we get older, it is inevitable that we become more aware of our mortality. Reflections on life and death do not necessarily have to be morbid. They can also prompt us to take actions that focus on our legacy.

This is what happened during the peak of COVID-19. Stuck at home and more mindful of health, Americans turned their attention to estate planning, leading to a surge in the creation of new wills and trusts.

But that trend has reversed since 2020, and the long-term trend is towards less estate planning.

Caring.com found that, in 2024, 43 percent of adults over age 55 have wills—down from 46 percent in 2023 and 48 percent in 2020. ^[2] From 2000 to 2020, the share of people aged 70 or over with wills declined from 73 percent to 64 percent, reports the Center for Retirement Research at Boston College. ^[3]

On the other hand, the number of young Americans who have a will has increased in recent years. However, around 75 percent of 18- to 34-year-olds and 35- to 54-year-olds still do not have one. ^[4]

Procrastination is the top reason people give for not making a will. ^[5] Other common excuses are not knowing where to start and concerns about how complicated or expensive estate planning might be. ^[6]

Why Estate Plans Can Fail

The reasons why people do not have an estate plan underscore the more significant point that estate planning can often feel overwhelming and unpleasant.

However, not having a plan that addresses what happens to our money and property after our death, who cares for our minor child when we cannot, and who will manage our affairs during an emergency while we are alive, among other concerns, puts loved ones in a difficult position.

Without a plan, your family may have to turn to the courts for answers, which will likely not satisfy anybody. Disagreements can spawn litigation that pits siblings against siblings and squanders money on legal fees.

These issues can also arise when an estate plan is incomplete, inaccurate, or outdated.

According to the book Estate Planning for the Post-Transition Period , approximately 70 percent of estate settlements result in asset losses or family disharmony, outcomes the authors attribute to estate planning failures that are within the family’s control. ^[7]

An estate plan can fail for many reasons. Some of the leading causes are a lack of follow-through, not informing heirs about the general outlines of the plan, and not updating the plan.

You might, for example, set up a trust to avoid probate or to manage accounts and property for an underage or disabled loved one, but if you do not follow through by transferring ownership of your accounts and property to the trust or making the trust the beneficiary, the trust will likely not accomplish your goal of avoiding probate.

Another common mistake is setting up powers of attorney and medical directives, putting them in a drawer or filing cabinet, and not telling anybody about them. These documents authorize others (i.e., “agents”) to act on your behalf. Some may take effect immediately, while others may take effect only when necessary (e.g., during incapacitation). However, these important tools cannot help you if nobody knows the documents exist and where to find them.

Having an out-of-date plan can result in failures that are on par with having no plan. As life changes, the desired beneficiaries of your accounts and property, guardians for your minor children, and agents during your incapacity are subject to change. An estate plan that does not reflect the latest circumstances and your current wishes could lead to unintended—and potentially disastrous—outcomes.

Signs Your Estate Plan Is Out-of-Date

An old, out-of-date estate plan can leave loved ones grappling with many of the same issues caused by not having an estate plan.

Loved ones may not be adequately taken care of, accounts and property could end up going to inappropriate beneficiaries, your estate may have adverse tax consequences, you may not receive the end-of-life care you want, and your estate could be subject to unnecessary probate proceedings, to name just a few possible consequences.

While there is no fail-proof set of rules for determining when an estate plan should be updated, estate planning attorneys recommend revisiting a plan every few years or when there is a significant change in your life, your family’s life, or the law.

Here are a few signs that your estate plan is outdated:

It was created between 2018 and 2024. The planned expiration of the Tax Cuts and Jobs Act of 2017 at the end of 2025 is set to dramatically lower the lifetime federal estate and gift tax exemption amount, potentially increasing the number of estates subject to the federal estate tax and the estate tax liability amount.
You wish to modify who receives an inheritance from your estate, the amounts they receive, or the conditions you place on an inheritance, such as instructions for trust distributions.
You decide to make a charitable gift from your estate.
A beneficiary, guardian, or agent has died, is sick, or is no longer a proper choice for some other reason, such as developing a substance abuse problem or showing poor judgment.
A family member has suggested that they might challenge your will as presently written, and you want to add a no-contest clause (if recognized in your state) that discourages them from doing so using the threat of disinheritance.
Your relationship with one or more family members has become strained, and you intend to disinherit them or change their inheritance.
You have concerns about protecting a beneficiary’s inheritance from a spouse, divorce, lawsuit, or creditor.
You or a family member recently divorced, remarried, became a widow or widower, or had a child.
You acquired or disposed of significant accounts or property since your estate plan was created or last updated, for example, by inheritance.
You purchased a new home, vacation home, rental property, or some other type of real estate.

This list is not exhaustive, but if even one item applies to you, it may be an excellent time to review and update your estate plan.

Guidelines for Keeping an Estate Plan Up-to-Date

Agents, beneficiaries, and inheritance amounts and distribution plans constitute the core of your estate plan and should be regularly revisited.

Be sure to also remember other details such as naming backup beneficiaries, agents, and trustees and adding provisions that allow beneficiaries to replace poorly performing decision-makers.

Short of changing a beneficiary’s inheritance, you can take steps now to prepare them for the financial implications of a bequest. Talk to them about how to handle their gift and ways you might like them to spend it. If you have serious doubts about their financial acumen but still want to provide for them, consider a gift placed in a trust that specifies how the money can be used.

Talk to your loved ones now, while you still can, about the value of your estate and what they can expect to inherit. Transparency will allow them to express their feelings. Tell them about any significant changes to your estate plan that could leave them feeling surprised and hurt, leading to conflict.

Loved ones should also be informed about where vital estate planning documents are kept and how to access them. Depending on where the information is stored, you might have to visit a bank with somebody to access a safe deposit box, give them the code to a lockbox, or let them know your digital passwords for documents stored on a computer or in the cloud. No matter where your records are kept, make sure that your loved ones will have legal access to them after your death. For example, with many banks, a person you designate as being able to access your safe deposit box will no longer have access after your death. Talk to your bank about ensuring your loved ones can access the box’s contents even after death.

Many states allow a copy of a person’s will to be filed with the probate court for safekeeping even during their lifetime. This precaution can ensure access if a key, password, or combination is misplaced or forgotten.

Never Let Uncle Sam Decide Who Your Heirs Are

I constantly tell people don’t let anyone dictate to you who gets the benefits of your hard work when you pass. The only constant in life is change. An estate plan you created years ago is unlikely to reflect your present situation and priorities and could be almost as bad as not having one.

We’ve been doing estate planning for clients for years and spend a great deal of time staying up to date on the latest rules, laws and trends. Contact me and schedule an appointment to ensure your estate plan is done the way you want it done.

Windfalls and Wisdom: Managing Sudden Wealth with Expert Guidance

Sat, 23 Mar 2024 16:25:22 GMT

As an attorney who has represented lottery jackpot winners, I am often asked whether the winners have any similar characteristics such as playing strategy, geographic location or even the time and location of where they bought their winning ticket.

I am not aware of any such similarities other than the fact that they all played of course. But speaking of similarities, you don’t have to win the lottery to have issues in dealing with life events resulting in what I call “sudden wealth”.

Examples of sudden wealth include when a person inherits money, settles a lawsuit or sells their business. How someone receives these funds, what they do with them, their personal tax situation etc are all important considerations in order to maximize the potential of such funds.

A good plan may involve a tax advisor, wealth management professional and insurance expert.

I tell people all the time, you may decide not to hire me to help with your sudden wealth opportunities but please don’t try to manage it alone. Sudden wealth is not a DIY activity!

Creating an Estate Planning Roadmap

Fri, 29 Sep 2023 19:59:03 GMT

Creating a Treasure Map: The Benefits of Preparing an Inventory before Death

If you have already done your estate planning, you have taken a significant step toward ensuring that your loved ones will know how to manage your affairs if you become incapacitated or die. However, simply having a will or a trust and related estate planning documents is often not enough. A detailed inventory of all of your accounts and property is crucial for helping your loved ones manage your legal and financial affairs effectively.

Most estate planning attorneys have received calls from distressed children who knew that a deceased parent had a will or a trust, but had no idea what accounts, insurance policies, or items of real and personal property the parent owned. If an inventory was never prepared and shared with the parent’s attorney, the child likely had to spend countless hours meticulously combing through the parent’s file cabinets, drawers, tax returns, mail, and online accounts to identify what the parent owned.

Needless to say, this is not something that anyone wants to happen. Even if you do not have a will or a trust in place, you do not need to wait to prepare an inventory of your property until you have created these legal documents. In fact, assembling an inventory can be an excellent first step when it comes to your estate planning.

How to Create an Inventory

Creating an inventory of your accounts and property does not need to be very complicated. It can be a simple word processing document or even a handwritten list. A lot of my clients create their inventories in Excel. There are also numerous online services that can help you create a thorough inventory of your property. Many of these services enable you to automatically share your inventory with chosen individuals at a time that you designate before death or disability strikes. The bottom line is that any of these methods can work well—the important thing is that you create an inventory. Below is an example of an inventory formatted as a spreadsheet with columns and rows:

Of course, this is just an example of what an inventory could look like. You should include any information that you think will be helpful to someone who is put in charge of collecting your property after you have passed away. You might include additional details, such as where the property is located and passwords for access to information that is stored online.

Probate and Your Property

As you create your inventory, you will review how each item is titled or who is named as the beneficiary on certain accounts, which will enable you to identify those items of property that will have to go through probate. Probate is the court process that appoints an executor or personal representative to inventory your probate property and distribute the property according to state law or the terms of your will, if you have one. Generally speaking, any account or property that meets the following conditions will have to go through the probate process: (a) is owned only in your name, (b) is not owned jointly with another person, (c) is not titled in the name of a trust or business entity (like an LLC or partnership), and (d) does not have a named pay-on-death (POD) or transfer-on-death (TOD) beneficiary associated with the property.

Probate can be an expensive, time-consuming, and public process that most people would rather avoid. If avoiding probate is a goal of yours, preparing an inventory well before you pass away can alert you to those items of property that will require a probate so that you can take steps prior to your incapacity or death to transfer ownership or retitle them.

Additional Benefits of a Complete Inventory

By creating an inventory with the type of information demonstrated in the example above, you can help your loved ones understand their next steps with regard to taking control of your property for management and distribution. Certain items and accounts, such as the following, may be distributed according to the unique legal aspects of that type of property:

Property owned in joint tenancy with rights of survivorship (such as real estate or bank accounts) will pass automatically to the surviving joint owner and outside of a trust or probate.
Some bank or investment accounts may have POD or TOD designations that allow those accounts to skip the probate process and be paid directly to a named beneficiary such as a child, spouse, trust, or charity.
Life insurance proceeds typically will not have to go through probate if you have properly completed the beneficiary designation form by naming your loved ones, a trust, or a charitable organization as beneficiaries on the policy.
Accounts and property titled in the name of a trust (i.e., owned by the trust) can be distributed outside of probate according to the terms of the trust agreement.
Retirement accounts usually require the listed beneficiaries to file a claim with the account custodian before the account will be paid out. Probate courts and trusts usually have no control over retirement accounts.
Vehicles will typically need to be transferred through the local department of motor vehicles, which requires an affidavit along with a death certificate and the physical car title.
Certain items of personal property (e.g., furniture, jewelry, art, collections, etc.), if above the value determined by state law, may be subject to probate, unless they are transferred into a trust before death.

What to Do with Your Inventory Once Created

After creating your inventory, make sure to store a copy where your loved ones will be able to easily find it should something happen to you. Consider the following locations:

an estate planning portfolio or binder
a file folder that is clearly marked and easily accessible to your loved ones
your client file with your estate planning attorney
an electronic document format that can be shared with your trusted loved ones online
a clearly labeled USB drive in your safety deposit box or safe (as long as you let your loved ones know what to look for, where to find it, and how to access it)
your client file with your other professional advisors (so that they can help your loved ones easily identify all of your property if your loved ones call them first after your death)

Once you have created and shared your inventory, you should create a plan for updating it. Over time, accounts get closed or consolidated with other accounts, property is sold or acquired, stocks get converted to cash, and retirement accounts get depleted. If you do not regularly update your inventory, there is a chance that you could create confusion and send your loved ones down rabbit holes as they try to handle your affairs.

Some people find it helpful to choose a specific date each year when they will review and update their inventory and also review their estate planning documents. Whatever will work best for you, make a plan, implement it, and then stick with it. Your loved ones will praise your name for years to come if you do.

If you need assistance or have questions reviewing your important documents, feel free to give me a call. 405-849-6791

Millennials, You Need an Estate Plan Too

Thu, 21 Sep 2023 16:03:45 GMT

The Millennial's Guide to Estate Planning: Building a Legacy That Matters

As millennials (born 1981 to 1996), you are well known for your distinctiveness as a group. Your generation has followed paths and set goals that are decidedly different from those chosen by previous generations. You are highly diverse, better educated, more socially conscious, and wait longer to have families than your parents and grandparents.

But one thing you have in common with other generational groups is the need for estate planning. Unfortunately, a startling 79% of millennials do not have basic estate plans in place. Your needs and goals may vary, but having an estate plan in place is crucial for every adult, including millennials. You do not know what the future holds, and we can help you make sure that plans are in place that not only provide for your own future needs but also those of your loved ones and pets.

Will and/or Trust

As a millennial, you may not have accumulated as much wealth as members of older generations, but it is important for you to make sure that your money and property will go to the family members or loved ones you have chosen if something happens to you.

If you do not have a will or trust, your money and property will pass to the person designated by state law, which may not be the person you would want to inherit your prized possessions and money .

In addition, if you are married and have young children, you need to take steps to ensure that your spouse and children are provided for. A trust is often the best solution: If your spouse inherits your money and property outright under a will, and your spouse eventually remarries, your assets could go to the second spouse instead of your children. In addition, the inheritance will be vulnerable to claims made by your spouse’s creditors.

A trust can avoid these results by allowing you to choose who receives your property and money, as well as the timing and size of the gifts.

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See our Wills and Trusts: In Plain English page for more information

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Pet trust

I f you are one of many millennials, especially those who live in large urban areas, who chose either to delay having children or to remain childless, you may have adopted pets that you love and dote upon just as you would a child. Especially if you are single, you should consider a pet trust to provide for your pet’s care if something happens to you.

The pet trust can allow you to make arrangements for your pet if you die or are physically unable to care for them yourself. The pet trust can not only specify a caregiver for your pet, it can also provide care instructions and set aside funds sufficient to care for your pet’s needs (medical care, grooming, exercise, etc.). You also have the ability to name an additional person to manage the money you have set aside for your pet, if you would rather have someone other than the caregiver in charge of the money.

Charitable remainder trust

Millennials are well known for being socially conscious and wanting to make a positive difference in the world. If you want your money and possessions to support a charitable cause when you pass away, you may be interested in establishing a charitable remainder trust, which enables you to benefit from a stream of income for your own life, with the remaining money in the trust going to a charity you have selected upon your death.

Planning for Student Loans or Credit Card Debt

As the cost of college tuition continues to increase, the level of debt millennials have begun their adult lives with is startlingly high. The average student loan debt of adults aged 25 to 34 is $33,000 per borrower. Federal student loans typically are forgiven upon the borrower’s death, but the estates of borrowers who obtained private loans can be pursued by those lenders. In addition, high credit card debt is prevalent among millennials.

If you have incurred substantial debt, life insurance sufficient to cover income tax on the cancellation of debt in the case of a federal student loan or to cover the debt itself if a student loan is owed to a private lender or money is owed to a credit card company may be a good solution if you are concerned about the burden your debt could place on your loved ones upon your death.

Digital Assets

If you are like many millennials, who are the first generation who grew up using the internet, you have likely amassed a much greater quantity of digital assets than members of previous generations. These assets may include social media accounts, blogs, photographs and videos, financial accounts, and email accounts, among many others.

A comprehensive list of these of these assets, which may be among your most prized possessions, as well as the accompanying usernames and passwords, and instructions for their management, is essential to ensure that your wishes are honored if you pass away or become too ill to manage them on your own.

Depending upon your wishes, you can appoint a separate person to wind up (or continue managing, e.g., in the case of a blog) these assets and accounts, or you can choose to have your executor or trustee handle this aspect of your estate. The list, which can be incorporated by reference into your other estate planning documents, should be stored in a secure place along with your will and/or trust.

Powers of Attorney

Medical power of attorney. If you are a younger millennial, you may not realize that your parents no longer automatically have the right to make medical decisions on your behalf if you become too ill to make them on your own or if you are unable to communicate your wishes.

Even if you are married, your spouse may still need to be properly named in a medical power of attorney to make decisions for you when you cannot. It is also important to designate a trusted person to act on your behalf if your spouse is unavailable.

If you fail to have a medical power of attorney prepared, a court proceeding may be necessary to appoint someone to fill that role if, e.g., you are in an automobile accident and are unconscious. You should also consider completing a living will spelling out your wishes regarding medical treatment you want--or don’t want--at the end of your life or if you are in a persistent vegetative state.

Financial power of attorney . Another document that is essential for your care if you were to become unconscious or too ill to make your own financial decisions is a financial power of attorney. It allows a person you have named to pay bills, take care of your home, manage your accounts, and make other money-related decisions for you.

Even if you are married, a financial power of attorney is important because any bank accounts or other property that are not jointly owned cannot be managed by your spouse without it—unless your spouse goes to court and asks to be appointed as your guardian, causing unnecessary stress in an already distressing situation.

A financial power of attorney can also be helpful if you do a lot of international travel and may occasionally need someone to handle your financial matters while you are out of the country.

Let Us Help You Prepare for the Future

You may think that estate planning is only for the elderly. However, even if you are young, an estate plan is crucial, regardless of whether you have accumulated much money or property.

A properly executed estate plan provides not only for the well-being of your family, loved ones, and pets, but also allows you to put plans in place in case you become ill or are severely injured and cannot make medical and financial decisions for yourself.

Call us today to prepare for the future.

HOW to Own Your Real Estate

Fri, 14 Oct 2022 22:24:33 GMT

Real estate encompasses not only one's primary residence but also other real estate such as a vacation home or rental property. The ideal form of ownership varies for each. Read on to learn more about HOW to own each type of real estate.

Primary Residence

Because your primary residence receives special tax treatment, you should carefully consider how your home is owned. In some states, tenancy by the entirety offers married couples creditor protection from the creditors of one of the spouses (with a possible exception for federal tax liens) while still preserving relevant tax benefits. It also allows automatic transfer of ownership to the surviving spouse upon the death of the first spouse without court involvement. Transferring ownership of the primary residence to a joint revocable trust may also be an option if you live in a state that allows the tenancy of the entirety protection to transfer to the joint revocable trust. Ownership by the trust also means that the real estate will not go through the lengthy, expensive, and public probate process but will instead be handled according to your wishes as specified in the trust document. This is so important!

If you are single, owning the property in your name allows you to take advantage of tax benefits for primary residences. Transferring ownership to a revocable living trust may also allow you to retain the applicable tax benefits with the added benefit of avoiding the probate process. If asset protection is a major concern during your lifetime, certain types of irrevocable trusts are best suited for your needs but may require you to give up some control of the property.

The bankruptcy code may provide additional protections for a primary residence (e.g., your state may have a homestead exemption). However, in some states, transferring your primary residence to a trust may eliminate the homestead exemption because the trust rather than you (the debtor) will be deemed to be the owner of the residence. If this situation could apply to you, it is important that you meet with a knowledgeable estate planning attorney before transferring your primary residence to a trust.

Vacation Home

For some families, their vacation home has not only high monetary value but also significant emotional value. Ownership of a vacation home by a trust or limited liability company (LLC) can be advantageous because it addresses two main priorities: ease of transfer to the next generation and asset protection.

With a trust or LLC, you are able to establish rules for how the property is to be used and maintained, as well as designate what is to happen to the vacation home once you pass away. This can be a great solution if you want to ensure that the vacation home stays in the family for generations with minimal family conflicts.

An additional benefit of having an LLC own your vacation home is that it provides limited liability from outside claims. If a judgment is entered against the LLC, the creditor is limited to the accounts or property owned by the LLC to satisfy the creditor’s claims and cannot look to your personal accounts or property or those of the other members. Also, if a judgment is entered against you or another member for a claim unrelated to the LLC, it will be harder for a creditor to force a sale of the vacation home. This can be incredibly helpful if you wish to pass the vacation home on to the next generation without worrying about the individual financial situation of each new member.

Note: In some states, a single-member LLC (an LLC in which you are the only member) does not enjoy the same protection from your personal creditors. The rationale of these laws is that your creditors should be able to seek relief through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by seizure of money and property owned by the LLC.

If the vacation home has been in the family for many years, it is important to consult with us and your tax advisor to make sure that transferring your vacation home to a trust or LLC will not cause an increase in your property taxes or other unintended consequences.

Rental Property

Because rental property is an income stream rather than a residence, asset protection is usually the primary concern. As a landlord and owner of rental property, you face a higher probability of lawsuits arising in connection with the property because the occupants can change over time. Transferring ownership of the rental property to an LLC is a great option. If a renter gets injured on the property, sues the LLC that owns the property, and obtains a judgment that exceeds any property insurance you have, the renter can seek satisfaction of any claims only from the accounts and property owned by the LLC, not from your personal accounts and property or those of any other owners of the LLC.

In addition, ownership by the LLC may protect the rental property from your personal creditors. However, if you are forming a single-member LLC, it is important to have us check state law to make sure creditor protection is available.

Give Us a Call Today!

Whether you are concerned about your primary residence, family cabin, or rental property, we are here to assist you in protecting your valuable property. Given the various considerations for selecting a form of ownership, it is important to have the right advisors helping you along the way. Give us a call so we can discuss your current and future real estate ventures and the best way to protect them for generations to come.