Should you put your house in a trust

Quick insights

• A living trust is a legal document that places your assets into a trust during your lifetime, benefiting a variety of homeowners including those with family homes and blended families.
• A living trust differs from a will in terms of the probate process, privacy and control over assets during your lifetime.
• The process of putting your house in a trust involves drafting a living trust document, executing a new deed and managing the trust assets with the help of a qualified estate planning attorney.

Living trusts are valuable tools for estate planning. There are misconceptions surrounding living trusts, such as the idea that they are only for the wealthy. This is not true. They can benefit a variety of homeowners, especially in scenarios where you plan on passing down a family home or managing assets in blended families. In this article, we will delve into the key aspects of living trusts, compare living trusts to wills and outline the step-by-step process for creating a living trust and transferring property into it.

What is a living property trust?

A living trust is a legal document that places your assets, including your home, into a trust during your lifetime. You (the grantor) typically maintain control over the assets and can make changes to the trust as needed. Upon your death, the assets are distributed to your beneficiaries without going through probate.

Living trust vs. will: key differences

The key differences between a living trust and a will are the probate process, privacy and the level of control you have during your lifetime.

• Probate process: A will requires probate, which can be lengthy and costly. A living trust bypasses probate. Probate is the legal process that happens after someone dies to manage their estate. It involves verifying their will (if they have one), settling debts and distributing their assets to heirs.
• Privacy: A will becomes public upon death, while a living trust remains private.
• Control during life: With a living trust, you can manage and change assets during your lifetime, while a will only takes effect after your death.

Why do people put houses in a trust?

People put houses in a trust for many reasons such as:

• Protection of assets and privacy: A living trust keeps your assets private, avoiding public probate records. This could potentially help protect your estate from potential creditors.
• Avoidance of probate: Placing a house in a trust allows for a direct transfer to beneficiaries upon your death, bypassing the lengthy probate process.
• Smooth transfer of property: A trust facilitates an efficient and clear transfer of property, minimizing disputes among heirs.
• Flexibility and control over property distribution: You can control specific terms for how and when beneficiaries receive the property.

How do you put your house in a trust?

Below is an overview of the process on how to put your house in a trust:

• Start by drafting a living trust document, outlining how you want your assets to be managed and distributed. This usually requires legal assistance. Consult with a legal professional for support.
• Execute a new deed transferring the property from your name to the trust. This deed must be recorded with the appropriate county office to make it official.
• The trustee (this can be you) manages the trust’s assets according to the terms of the trust. Beneficiaries are the individuals who will inherit the property and other assets upon your death.
• It's important to work with a qualified attorney to make sure that the trust is properly established, compliant with state laws and tailored to your unique needs.

Should you put your house in a trust? Consider the pros and cons

There are a few factors to consider when deciding whether to put your house in a trust:

• Value of the estate: Higher-value estates may benefit more from a living trust.
•  Family dynamics: If you have a complex family structure, a trust can help clarify asset distribution. A complex family structure refers to a family arrangement that includes various types of relationships and dynamics such as blended families, stepfamilies, single-parent families and extended families.
• Location of property: Owning a property in multiple jurisdictions may necessitate a trust to avoid probate in each state.

Some of the potential advantages of placing your house in a trust include:

• Avoiding probate costs
• Flexibility
• Option to select beneficiaries
• Customizable distribution

Some of the potential disadvantages include:

• Complexity around establishing and maintaining the trust
• Loss of control
• Possible tax implications

Depending on the type of trust, you may relinquish some control over the property. Please note that transferring a house with a mortgage to a trust might trigger a due-on-sale clause, potentially requiring the loan to be paid in full. Do your research and consult with an estate planning attorney.

Alternative estate planning options

Exploring alternative estate planning options can help ensure that your wishes are honored, and your assets are effectively managed.

• Joint tenancy: Simplifies transfer upon death but can create complications if one owner sells or transfers their interest.
• Transfer on death deed: Allow property transfer without probate but are less flexible than a living trust regarding management during your lifetime.

In summary

Living trusts are crucial for estate planning, offering benefits like asset protection, easy property transfer and privacy. Regular updates are important to keep the trust aligned with your special needs and circumstances. Homeowners looking to learn more about living trusts can consult with estate planning professionals or a legal advisor. Gaining this knowledge can help improve your financial security and provide peace of mind for you and your loved ones.