If you’re like many, your most valuable asset is your home and it’s one you hope to pass on to your heirs after you die. An important component of estate planning is ensuring a transfer of assets to your loved ones with as little financial and emotional repercussions as possible. Putting a house in trust can accomplish that.
Your property doesn’t need to be sizeable for you and your heirs to benefit from creating an estate plan and establishing a trust. At AmeriEstate, we want to ensure you understand the benefits and possible drawbacks to having a home in trust, as well as the steps you need to take to transfer the house to a trust.
What To Know About Putting a House in Trust
A trust is a financial tool that sets aside your chosen assets for another’s future benefit. You no longer own the asset; the trust does. However, this doesn’t necessarily mean you have to give up control over your assets. The amount of power you have depends on the type of trust you establish. The trust is a legal arrangement that must meet particular guidelines based on the type.
As the one who creates the trust, you will be the grantor. The heirs receiving the assets are the beneficiaries, and the individual or entity with control over the assets in trust is the trustee. Putting your house in trust transfers ownership to the trust, though you must obtain a new deed to ensure the transfer holds up legally. Without a deed transfer, the trust does not really own the property, and your beneficiaries will risk legal challenges to its validity.
What Kind of Trust Should You Use?
There are two primary trust types — revocable and irrevocable — each with its own advantages and drawbacks, depending on your situation and the overall reasons for placing the house in trust. With an irrevocable trust, you can’t change your mind about the trust terms or dissolve it altogether unless your heirs agree to it.
A living or revocable trust gives you more control over what happens to the assets within the trust. You can alter the terms, add or remove assets or dissolve the trust altogether without permission from the beneficiaries. In most cases, a living trust is the more desirable option for the property. You can also make yourself trustee, giving you the primary decision-making power and responsibility.
What Are the Benefits of Placing Your Home in Trust?
One of the primary reasons for establishing a trust for your house is to protect your heirs from the probate process. A will does not offer this same protection. When you die, any assets you own that are not in trust must go through probate. During this process, anyone can claim or contest their rights to inherit or own the property. Regardless of what your will states, the intended beneficiaries might find themselves in a legal battle over who gets the house. Even families who agree to a homeowner’s wishes before they die often feel differently after their loved one passes.
Probate is costly and time-consuming. The more complex an estate is, the longer the probate process can take. Additionally, contentious disagreements can lead to a years-long process. In the end, it will be the judge who determines who inherits your house. If you don’t have a will, the court will grant inheritance according to your state’s laws.
Putting your home in a trust may also benefit you or your beneficiaries financially, but only if you use the irrevocable trust form. Irrevocable trusts protect your house from creditors and lawsuits. After you die, your heirs may also have a reduced tax burden.
What Are the Possible Drawbacks of Placing Your Home in Trust?
The main disadvantage to using a trust to protect your home for your heirs is the expense of establishing and maintaining the trust. However, at AmeriEstate, we offer estate planning services at reasonable prices, providing more families with legal guidance and services.
Establishing and managing a trust is complicated, making it another drawback for many. Though the do-it-yourself option is cheaper, setting up a trust that legally holds up isn’t easy. Furthermore, placing a house in a trust makes it harder to refinance it. If you create an irrevocable trust, your decision is permanent.
How To Put a House in a Trust
We recommend you use an attorney to ensure your home and your heirs are protected. Even so, you still need to know how to put a house in a trust to ensure you understand the process and requirements. When you set up the trust, you need to determine who will serve as trustee. If you go with a living trust, you can name yourself a trustee. If you serve as a trustee, you will also need to identify a successor trustee who will take over the role after you pass. Additionally, you will need to:
- Determine who your beneficiaries are
- Identify your contingent beneficiaries and establish an order of preference
- Decide on the trust’s terms
- Complete the legal paperwork and sign it
- Obtain a new deed that transfers ownership to the trust
After you create the trust and transfer ownership, you will need to send a copy of the deed to your county recorder’s office. Sending the deed to the recorder’s office makes the trust official and legally binding, so you can’t skip this step. If you have a revocable trust and decide to dissolve it in the future, you will be able to transfer the house back into your name.
Why Work With AmeriEstate When Putting a House in Trust
If you’re considering putting your house in a trust, AmeriEstate is here to help. Our attorneys can walk you through the process, ensure your home and beneficiaries are protected, and make sure the language in your trust reflects your wishes. We make the process as easy for you as possible while helping you understand your options and the process. AmeriEstate prides itself on providing personalized services with tailored strategies that meet individual client needs. Contact us today to receive a free consultation.
Sources:
https://www.rocketmortgage.com/learn/putting-house-into-trust
https://www.bankrate.com/real-estate/putting-home-in-trust/#pros-v-cons