Why Would You Put Your House In A Trust?

Why Would You Put Your House In A Trust - Should I Put My House In A Trust - Can You Put A House In A Trust - How To Put Your House In A Trust

Why would you put your house in a trust? 

In this article, you’ll learn about:

  • how to avoid probate, estate taxes, creditors, and lawsuits
  • when you should put your house in a trust
  • the disadvantages of putting your house in a trust
  • how to put your house in a trust

Keep scrolling to learn more. 

Table of Contents

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Why Would You Put Your House In A Trust?

Putting your house in a trust transfers ownership to the trust, allowing for potential:

Here are reasons why you would put your house in a trust: 

  • Avoid Probate: Placing your house in a trust lets it avoid probate. This can make property transfer quicker and more private after your death.
  • Reduce Estate Taxes: Trusts can help minimize the estate taxes your heirs might need to pay.
  • Control from the Grave: Trusts let you set specific rules about who gets the property and when. For example, you can dictate that a child only receives the house at age 30.
  • Protection from Creditors: Some trusts can protect your house from legal judgments or creditors.
  • Plan for Incapacity: If you become unable to manage your affairs, a successor trustee can manage the property on your behalf.
  • Maintain Privacy: Trusts can keep the details of your property and to whom it’s distributed private, unlike the public probate process.
  • Ease of Management: If you own multiple properties in different states, placing them in a trust can simplify the management and transfer process upon your death.

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

Avoiding Probate

Here is how your house being in a trust helps your house avoid probate

  • Ownership Transfer: When you put your house in a trust, you’re essentially transferring the ownership of the house from your personal name to the trust. You, as the individual, no longer own the house; the trust does.
  • Trustee Control: Once in the trust, the house is controlled by a trustee. If you’re setting up a revocable living trust, you can be the initial trustee, managing the property as before, but with the title held by the trust.
  • Instructions for Succession: Within the trust document, you provide instructions for what should happen to the house upon your death. This can include who should inherit it and under what conditions.
  • Immediate Transfer: When you pass away, the designated successor trustee in the trust document takes over. This person or entity is responsible for distributing the house according to your instructions in the trust, without the need for probate court intervention.
  • Bypassing Court: Because the trust provides direct instructions and already holds the title to the house, there’s no need for a court to step in to determine how the house should be distributed. This bypasses the probate process entirely.
  • Quicker & More Private: As a result, the transfer of the house to the beneficiaries can be quicker, and because it doesn’t go through the public probate process, the details of the house and its beneficiaries remain private.

Read More: Why Would Someone Want An Irrevocable Trust

Reduce Estate Taxes

Putting a house in a trust reduces your estate taxes – here’s how:

  • Unified Credit: Trusts let married couples combine their tax-free allowances. This doubles the property value they can pass on without estate taxes.
  • Gifting with Discounts: The Qualified Personal Residence Trust (QPRT) lets homeowners gift their house to beneficiaries but at a lower tax value. They transfer the house into a trust but keep the right to live in it for some years. When this term ends, beneficiaries get the house. The initial gift’s tax value is reduced due to the homeowner’s retained living rights. So, if the house’s value goes up over time, less tax is owed.
  • Life Insurance Trusts: The Irrevocable Life Insurance Trust (ILIT) holds life insurance policies. This means the payout, when claimed, isn’t counted in the estate’s taxable value. This non-taxed money can then pay any estate taxes owed on assets, like houses.
  • Skipping Generations: Generation-Skipping Trusts pass assets directly to grandchildren, skipping the owner’s children. This means avoiding some estate taxes that add up through generations.
  • Lowering Asset Value: Some trusts reduce the taxable value of assets they hold. They do this by accounting for things like a lack of control over the asset, making the tax bill smaller.
  • Freezing Asset Value: Trusts like the Grantor Retained Annuity Trust (GRAT) fix the value of assets for tax reasons. If the house’s value increases, the extra value goes to the beneficiaries without extra taxes.

Control from the Grave

What happens when you put your house or other assets in a trust/

You’re essentially giving instructions for how those assets should be managed or distributed:

  • after your death
  • you become incapacitated 

Here’s how this provides control:

  • Set Conditions: You can set rules in the trust. For instance, a child might only get the house at age 25.
  • Staged Handouts: You can break up when the house is given. Maybe a piece at age 20, then more at age 30.
  • Care Rules: You can decide how the house is looked after. You might say it can’t be sold for 10 years.
  • Pick Who Gets It: The house goes only to people you name. This avoids unexpected inheritances.
  • Safe Provisions: If you worry a loved one might waste the house or money, you can put in safety rules. This might mean a manager checks before they get anything.
  • Choose a Manager: You pick who looks after the trust. This person ensures your rules are followed.

Protection from Creditors

Using a trust to protect your house from creditors is possible. 

But, you need to do it correctly so the courts don’t think you’re dodging creditors. 

Here’s how it gives you protection:

  • Ownership Transfer: When you put your house in a trust, you’re transferring ownership from your name to the trust’s name.
  • Beyond Reach: Once the house is in the trust, it’s typically considered separate from your personal assets. This makes it harder for creditors to access.
  • Irrevocable vs. Revocable: An irrevocable trust offers more protection than a revocable trust. With an irrevocable trust, you give up control, making it more challenging for creditors to claim you still effectively own the house.
  • Timing Matters: If you transfer your house to a trust right before a lawsuit or debt claim, the court might see this as a move to dodge payments and could reverse the transfer.
  • Protection for Heirs: Trusts can also protect the house from your beneficiaries’ debts or legal issues after your death.

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

Plan for Incapacity

Placing a house in a trust allows you to control it when you’re incapacitated. 

Here is why you’d put your house in a trust for incapacity planning:

  • Successor Trustee: You choose a successor trustee. They take over if you can’t manage the trust.
  • Define Incapacity: The trust can clearly define what “incapacity” means, often using a doctor’s opinion.
  • No Need for Court: Without a trust, courts might decide who manages your affairs. With a trust, your chosen person takes over without court interference.
  • Asset Protection: The successor trustee must care for your house properly. This means no misuse or neglect.
  • Easy Decision Making: The trustee can make necessary decisions about the house. This includes tasks like repairs or paying taxes.
  • Your Care Instructions: The trust can also specify how to use funds for your personal care, ensuring your wishes are met.

Read More: Can You Set Up A Trust Without An Attorney?

Maintain Privacy

A trust helps you maintain privacy by:

  • No Public Probate: Trusts bypass probate. Probate records are public. Trusts aren’t.
  • Hidden Transfers: The trust owns and transfers the property. Beneficiary names and trust terms stay private.
  • No Public Asset Value: Trusts hide the value of your house. Without a trust, probate might disclose it.
  • Blocks Nosey People: Trusts keep details away from marketers, scammers, and curious neighbors.
  • Beneficiary Privacy: Beneficiaries get assets from trusts, not estates. This means their names aren’t in public records.

Read More: Why Would A Trust Go To Probate?

Ease of Management

Putting your house in a trust can make management of your property easier. 

This is really applicable to multiple properties and not just your primary home. 

Here is how a trust can make management of rentals easier:

  • Unified Management: All properties are under one trust. This means easier oversight.
  • Avoid Multiple Probates: Have property in different states? A trust avoids separate probate in each state.
  • Successor Trustee Steps In: If you can’t manage the house, your chosen successor trustee will. This avoids waiting for a court decision.
  • Clear Rules: Trusts have detailed instructions. This tells others how you want the property handled.
  • Smooth Transitions: After your death, the house goes to beneficiaries without court delays.
  • Change When Needed: Have a revocable trust? You can change its terms anytime. This lets you adjust to new situations.
  • Protection from Some Debts: Some trusts can shield the house from personal creditors. This means the house is safer from forced sales.

Read More: Who Needs A Trust Instead Of A Will?

Can You Put A House In A Trust?

Yes, you can put a house in a trust.

Doing so allows you to maintain control of the property during your lifetime. 

When you transfer a house to a trust, the trust becomes the legal owner. 

There are different types of trusts, but a common one for this purpose is a “living trust.” 

Placing a house in a trust can:

  • offer tax benefits
  • protect assets
  • avoid probate 

It’s important to choose the right type of trust for your needs. 

Creating and managing a trust requires specific legal steps. 

It’s beneficial to review these steps with a trust lawyer.

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

Putting your house in a trust offers many benefits, such as avoiding probate. 

However, there are also some disadvantages to consider.

  • Initial Costs: Setting up a trust can be expensive due to legal fees.
  • Maintenance Effort: Trusts require regular updating to address changes in your assets or wishes.
  • Complications in Refinancing: Some banks may be hesitant to refinance a property in a trust.
  • Potential Tax Issues: Some trusts might not provide the same tax benefits as owning a property personally.
  • Limited Asset Protection: Not all trusts protect against creditors or legal judgments.
  • Loss of Homestead Exemption: In some states, transferring your home to a trust can make you ineligible for property tax exemptions.
  • Complexity in Selling: Selling a property from a trust might involve additional steps or documentation.

How To Put Your House In A Trust

So, you’re considering putting your house in a trust. 

Here are the steps to putting a house in a trust:

  • Decide the Trust Type: Choose between a revocable (can be changed) or irrevocable (fixed) trust based on your goals.
  • Choose a Trustee: Appoint a person or institution to manage the trust. You can be your own trustee in some cases.
  • Hire a Lawyer: Find an experienced estate planning attorney to draft the trust document.
  • List Assets: Clearly detail all assets, especially your house, to be included in the trust.
  • Create the Trust Document: The attorney will draft this, outlining the trust’s terms and beneficiaries.
  • Sign in Front of a Notary: Ensure all involved parties sign the trust document with a notary present.
  • Transfer Property Title: Change the title of your house from your name to the trust’s name using a deed.
  • File the Deed: Submit the new deed to the local county recorder’s office.

FAQs About Why You Would Put Your House In A Trust

Here are other questions that clients ask us about putting a house in a trust. 

Can I Put My House In A Trust Without A Lawyer?

Yes, you can put your house in a trust without a lawyer. Here’s how:

  • Choose a Trust Type: Decide between a revocable or irrevocable trust.
  • Select a Trustee: Pick a person or institution to manage the trust.
  • Use a Trust Kit: Purchase a trust kit or online trust document service tailored to your state’s laws.
  • Detail Your Assets: Clearly list your house and any other assets to be included in the trust.
  • Fill Out the Trust Document: Follow the guidelines provided by the kit or service.
  • Notarize the Document: Sign the trust document in front of a notary public.
  • Transfer Property Title: Use a new deed to transfer the title of your house to the trust.
  • Record the Deed: Submit the deed to your local county recorder’s office.

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

No, your house doesn’t have to be paid off to put it in a trust. 

Many people transfer their homes to a trust while still having a mortgage. 

However, it’s essential to notify your lender and ensure the trust transfer doesn’t violate your loan agreement. 

If you’re considering this, check with your lender and review the terms of your mortgage.

Who Pays The Mortgage On A House In A Trust?

Whoever’s name the mortgage is in pays the mortgage on a house in a trust. 

  • Original Borrower Responsibility: Even if a house is in a trust, the original borrower remains responsible for paying the mortgage.
  • Trust Assets: If the trust has assets or income, these can be used to pay the mortgage.
  • Trust Beneficiaries: If stipulated in the trust terms, beneficiaries might contribute to mortgage payments.
  • Trustee’s Role: The trustee ensures the mortgage is paid, either from trust assets or by coordinating with the responsible party.

What Happens To House In Trust After Death?

When an owner puts a house in a trust and then dies, a trustee takes charge of the trust’s assets. 

The trustee first clears any debts or bills for the property. 

After that, they follow the trust’s terms to manage or give out the house. 

This could mean the named beneficiaries get the house directly or the trust keeps managing it. 

Houses in trusts skip the long probate process, making transfers quicker. 

The trust might also offer tax benefits. 

Throughout, the trustee makes sure the house stays in good shape and follows the trust’s rules.

Get Help Putting Your House In A Trust

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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