How Much Does It Cost To Put Your House In A Trust?

How Much Does It Cost To Put Your House In A Trust - Cost To Put House In Trust - Cost Of Putting House In Trust

How much does it cost to put your house in a trust?

In this article, you’ll learn about: 

  • how much it can cost to put a house in a trust
  • the range of costs and the average 
  • the yearly fees you’ll have to pay
  • whether it’s worth putting a house in a trust
  • the tax benefits
  • how the tax benefits compare to the cost
  • who needs a trust instead of a will
  • can you put a house in a trust with a mortgage
  • who pays the mortgage on a house in a trust

Let’s dig in. 

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How Much Does It Cost To Put Your House In A Trust?

On average, it costs $3,000 to put your house in a trust.

Depending on the complexity of the estate, it costs between $1,000 – $5,000 to put your house in a trust. 

Putting a house in a trust is a way of managing and protecting your property, often for estate planning purposes. 

Here’s a simple breakdown of the costs involved:

  • Attorney’s Fees: To draft a trust document, you might pay between $1,000 to $3,000 if you’re single, or $1,200 to $4,000 if you’re a couple. These fees can be higher for more complicated estates.
  • Filing Fees: When you transfer your house to the trust, there might be fees to record the new deed. This can range from $20 to a few hundred dollars.
  • Other Costs: Some additional expenses can include:
    • Paying a notary to confirm signatures.
    • Buying copies of your property’s deed.
    • Costs for adding other assets to the trust, if you choose to do so.
  • DIY Options: If you use an online service or software to create your trust yourself, you might spend between $50 to $500. However, this might not cover all your specific needs.
  • Maintenance and Amendments: In the future, you might need to change your trust because of personal reasons or legal changes. This can cost extra, but often less than setting up the trust in the first place.

Read More: How Much Does A Living Trust Cost?

How Much Does A Trust Cost To Maintain?

You could expect to spend between 0.5% to 1.5% of trust assets plus 0.5% to 2% of invested assets plus $600 to $2,500 annually to maintain a trust.

Maintaining a trust involves several potential costs:

  • Annual Trustee Fees: If you hire a professional trustee, they usually charge a fee. This can be a flat annual fee or a percentage of the trust’s assets. Fees typically range from 0.5% to 1.5% of the trust assets annually.
  • Tax Preparation Fees: Trusts often need separate tax returns. Preparing these returns can cost between $500 to $2,000 per year, depending on complexity.
  • Investment Management Fees: If trust assets are invested, there will be fees for managing those investments. These usually range from 0.5% to 2% of the invested assets annually.
  • Administrative Expenses: These are costs for tasks like record-keeping, postage, or bank fees. They can vary, but budgeting $100 to $500 yearly is a general estimate.

Let’s compare the low end to the high end of trust maintenance costs:

  • Low End: 0.5% of trust assets + $500 + 0.5% of invested assets + $100 = 0.5% of trust assets + 0.5% of invested assets + $600 annually.
  • High End: 1.5% of trust assets + $2,000 + 2% of invested assets + $500 = 1.5% of trust assets + 2% of invested assets + $2,500 annually.

Read More: At What Net Worth Do I Need A Trust?

Is There A Yearly Fee For A Trust?

Yes, there can be yearly fees for a trust. These fees can include:

  • Trustee Fees: If you use a professional trustee, they often charge an annual fee. This can be a set amount or a percentage of the trust’s assets.
  • Tax Preparation Fees: Trusts might need their own tax returns. This incurs a yearly cost.
  • Investment Management Fees: If the trust has invested assets, there are fees for managing those investments.
  • Administrative Expenses: This covers tasks like record-keeping and banking fees.

The exact yearly fee for a trust varies based on its size, asset management, and other factors.

Read More: How Long Do You Have To Transfer Property After Death?

Is It Worth It To Set Up A Trust?

Setting up a trust provides greater control, privacy, and protection for assets. 

It’s worth considering if you prioritize these benefits, despite the higher costs and complexity compared to other estate planning tools.

Setting up a trust offers several advantages:

  • Avoid Probate: Trusts can bypass the probate process, making asset distribution faster after death.
  • Privacy: Unlike wills, trusts aren’t public records, so asset distribution remains private.
  • Control: You dictate how and when beneficiaries receive assets, such as at a certain age or milestone.
  • Protection: Trusts can protect assets from beneficiaries’ creditors or legal judgments.
  • Flexibility: Trusts can be tailored to specific needs, like caring for a special needs beneficiary.

However, there are downsides:

  • Setup Cost: Creating a trust is typically more expensive than a will.
  • Maintenance: Trusts require regular updates and might have ongoing management costs.
  • Complexity: Managing and understanding trusts can be more complicated than handling a will.

Read More: What Assets Cannot Be Placed In A Trust?

Tax Benefits Of A Trust

A trust can offer several tax benefits:

  • Estate Tax Reduction: Trusts can help reduce the size of your taxable estate, potentially lowering the estate tax owed upon death.
  • Gift Tax Planning: By transferring assets into a trust, you can take advantage of annual gift tax exclusions and reduce your taxable estate.
  • Income Splitting: Trusts can distribute income to beneficiaries in lower tax brackets, which might result in paying less overall tax.
  • Capital Gains Tax Planning: Some trusts allow assets to be distributed at their stepped-up basis, potentially reducing capital gains tax when sold.
  • Property Tax Benefits: In some areas, transferring property into specific trusts might avoid reassessment, keeping property taxes lower.
  • Protection from Generation-Skipping Tax: Trusts can be structured to skip generations without incurring additional taxes.

Here is how the tax benefits of a trust compare to the cost of putting your house in a trust:

Determining the average tax savings from putting your house into a trust can be complex and varies based on individual circumstances. 

Here’s a simplified overview:

Tax Savings from Putting a House in a Trust:

  • Estate Tax: If your estate exceeds the federal estate tax exemption, putting a house into a trust can help reduce the value of your taxable estate. The savings can be the estate tax rate (which has been around 40% in recent years) applied to the value of the house or its appreciation. However, many people’s estates do not exceed this exemption, and for them, there might not be direct estate tax savings.
  • Property Tax: In some states, transferring a house to certain trusts avoids property tax reassessment, which can result in substantial annual savings if property values have risen significantly since the original purchase.
  • Capital Gains Tax: With trusts like a Qualified Personal Residence Trust (QPRT), if the house appreciates in value, the appreciation might not be subject to capital gains tax when sold.

Cost of Putting a House in a Trust:

As discussed earlier, the costs can range between $1,000 to $5,000, with an average of $3,000.

This is considering trust attorney fees, filing fees, and other associated costs.

Comparison of the cost to put a house in a trust vs. the tax benefits:

  • If your primary concern is estate tax, and if your estate is below the federal exemption, the costs of setting up the trust might outweigh any tax savings.
  • For property tax savings, it depends on your local property tax rate and how much your property’s value has appreciated.
  • For capital gains tax, savings can be significant if the property has greatly appreciated, potentially outweighing the costs of establishing the trust.

In many cases, the decision to place a house in a trust is less about immediate tax savings and more about long-term estate planning.

And it’s about ensuring assets pass to beneficiaries in a structured way.

Read More: What Happens To A House In A Trust After Death?

Who Needs A Trust Instead Of A Will?

A trust and a will serve different purposes. 

Here’s who might need a trust instead of, or in addition to, a will:

  • Asset Management During Life: Those who want their assets managed during their lifetime, especially if incapacitated, may prefer a trust.
  • Avoiding Probate: If someone wants to skip the probate process, which can be time-consuming and costly, a trust is beneficial.
  • Privacy: Trusts are not public documents, unlike wills. People who value privacy after death might choose a trust.
  • Complex Estate Plans: Those with large or complicated estates, multiple properties, or assets in different states might need a trust.
  • Specific Distribution Plans: If someone wants to stagger asset distribution to heirs (e.g., releasing funds at certain ages), a trust offers this control.
  • Blended Families: Trusts can clarify asset distribution in families with stepchildren or multiple marriages.
  • Minimizing Taxes: People aiming to reduce estate taxes for sizable estates might benefit from specific trusts.
  • Protecting Assets: If there’s a concern about beneficiaries misusing their inheritance, a trust can include safeguards.

Read More: How To Avoid Nursing Home Taking Your House

FAQs About The Cost Of Putting Your House In A Trust

Here are other questions that clients ask us related to the cost of putting your house in a trust. 

Can You Put A House With A Mortgage In A Trust?

Yes, you can put a house with a mortgage into a trust

However, there are a few things to keep in mind:

  • Due-on-Sale Clause: Many mortgages have a “due-on-sale” clause. This clause states that if you transfer the property to another entity, the lender can ask for the full loan amount immediately. But, under federal law, lenders typically can’t enforce this clause when you transfer the property into a trust for your own benefit.
  • Type of Trust: Make sure you use a revocable trust, as it’s usually seen as a transfer to yourself, making it less likely to trigger the due-on-sale clause.
  • Inform the Lender: Before transferring, notify your mortgage lender about your plans. They may require specific information or have procedures for such transfers.
  • Property Insurance: After transferring, ensure your property insurance knows the property is now owned by a trust, so coverage continues without issue.

Read More: Don’t Put Your House In A Trust

Does Your House Have To Be Paid Off To Put It In A Trust?

No, your house does not have to be paid off to put it in a trust

You can transfer a house with an existing mortgage into a trust. 

However, it’s important to check with your mortgage lender first.

Some loans have “due on sale” clauses that could be triggered by such a transfer. 

If allowed, once in the trust, the trustee becomes responsible for continuing mortgage payments.

Read More: How Long Can A House Stay In A Trust After Death?

Who Pays The Mortgage On A House In A Trust?

The grantor usually pays the mortgage on a house in a trust, but the trust can dictate other arrangements if needed.

When a house in a trust has a mortgage:

  • The person who transferred the house into the trust, often called the grantor or settlor, typically continues to pay the mortgage.
  • The trust document can specify other arrangements if desired.
  • If the grantor passes away, the trust might direct the successor trustee or beneficiaries to pay the mortgage using trust assets or income.

Read More: I Inherited A House How Do I Put It In My Name?

What Are The Disadvantages Of Putting Your House In A Trust?

Putting your house in a trust has several disadvantages:

  • Upfront Costs: Setting up a trust requires fees, often for trust attorney services and filing charges.
  • Maintenance Effort: Trusts need regular monitoring and potentially updating due to life changes or legal changes.
  • Loss of Control: Some trusts, once established, have rigid terms and can limit your control over the house.
  • Potential Tax Complexity: Trusts may require separate tax filings, leading to more complex tax preparations.
  • Irrevocability: Some trusts, once created, can’t be easily altered or revoked, which can be limiting.
  • Lender Issues: If there’s a mortgage on the house, transferring it to a trust might trigger a “due on sale” clause, requiring the mortgage to be paid immediately.

Read More: Can A Beneficiary Live In A Trust Property?

Hiring A Trust Attorney

If you want help from a trust law firm, fill out the form below. 

At The Hive Law, we understand the importance of:

  • protecting your hard-earned assets 
  • ensuring your family’s future
  • not losing everything to creditors and lawsuits
  • properly (and legally) distributing assets 

We only accommodate a limited number of clients each month.

So don’t miss your opportunity to work with our trust fund lawyers.

Benefits of our trust services:

  • Tailored solutions to fit your unique needs and goals
  • Expert guidance in navigating complex tax and legal matters
  • Preservation of your wealth for future generations
  • Streamlined asset distribution according to your wishes

Avoid the pitfalls of inadequate estate planning strategies:

  • Creditors seizing your assets
  • Lawsuits jeopardizing your family’s financial security
  • Family disputes over inheritance
  • Costly and time-consuming probate processes

Talk soon.

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