Why Put Your House in a Trust?
Should You Put Your House in a Revocable or Irreversible Trust?
Benefits of Putting Your House in a Trust
Downsides of Putting Your House in a Trust
Is Putting Your House in a Trust a Good Idea?
Putting Your House in a Trust Bottom Line
- You Avoid Probate
- Easy to Put Multiple Homes in the Same Trust
- Makes Things Simpler for Your Loved Ones
1. You Avoid Probate
The main advantage of putting your house in a trust is that it will save your family and loved ones from having to go through the probate process when you pass away. Additionally, putting your home in a trust will protect your heirs from costly probate fees, which can be up to 3% of your asset’s value, depending on what state your property is located in.
2. Easy to Put Multiple Homes in the Same Trust
You might also consider using a trust if you own multiple homes. If you have several properties, as is the case if you own a vacation home, your family needs to then deal with each state’s probate laws and their required fees if you leave the properties to your family and loved ones in a will. This also means that they will be responsible for hiring attorneys in each state as well as traveling back and forth to each state for court hearings, etc.
3. Makes Things Easier for Your Loved Ones
Putting your home in a trust will often make things easier for your family and loved ones. When you pass away, your family will be taken care of.
Keep in mind you’re not restricted to only putting your house in a trust. Any high-dollar possessions you own should be added to a trust. This includes but is not limited to
If you choose to put your home into a trust, there are two kinds of trusts you can pick from:
1. Revocable (or living) trust
A revocable trust, also known as a living trust, is a trust that you will have complete control over your trust up until your death. You can add and remove possessions from a revocable trust whenever you want. You can likewise liquify the trust entirely should your life or financial circumstances change.
In the unfortunate case of incapacitation, your spouse or another designated co-trustee can take control of and manage the trust for you.
There are two downsides to consider with a living trust. First, your asset is still included in your taxable estate at the time of your death, and a living trust will not protect your assets from ending up being taken by creditors.
2. Irreversible trust
As the name suggests, an irreversible trust cannot be changed. You will not be able to take assets out or even dissolve the trust if you subsequently change your mind.
Despite these restrictions, an irrevocable trust can save your family money in taxes after your death, given the fact that it won’t be included in your estate’s value.
- May Save on Estate Taxes
- Helps Avoid Probate
- Future Incapacity Protection
1. May Save on Estate Taxes
While putting your home in a trust generates no further beneficial tax treatment, you might conserve some estate taxes if your trust is created correctly.
2. Helps Avoid Probate
A lot of living trusts are structured to avoid probate and its expenses. Many homeowners wishing to avoid probate and transfer title to their home to their beneficiaries quickly find that avoiding probate through a trust is beneficial.
3. Future Incapacity Protection
Should you end up being ill and not able to effectively handle your finances, another trustee can be selected to manage your trust to protect your home. If your co-trustee is your partner, this is an easy way to secure your home upon death or incapacitation. Your partner can remain as trustee, managing your home, and any other properties you’ve moved to the trust.
- Probate Can Still be a Headache
During your lifetime, you must pay attention to the properties that are held in trust. Specifically, you may want to include more than just your home. As such, you must be consistent about transferring other possessions to the trust as you acquire them and likewise eliminate those you no longer own or want in the trust.
2. Probate Can Still be a Headache
If you put just your home in a trust, your other possessions will still undergo probate. This is true whether you have a will or not. Even smaller bank or investment accounts named in a trust must go through the probate procedure. Likewise, after you pass away, your estate might incur additional expenses as the trust must file an income tax return and value assets, potentially negating the expense savings of preventing probate.
Every person’s circumstance is different and has its own complexities. That’s why it’s vital to deal with your lawyer to understand your options and whether a trust is your best legal option. A lawyer can guide you with selecting a revocable or irrevocable trust based upon your assets, objectives, and pre-existing will or estate preparation already created.
Also bear in mind that laws change frequently. Likewise, your life and financial circumstance will also change. What might be the absolute best strategy for you today may no longer be your best option years from now. As such, you should evaluate your trust frequently, at least every two years, with your legal team.
Putting your house in a trust can be a great way to look out for your family and loved ones. A trust can save your heirs taxes and avoid the probate process, making it a great choice for many homeowners. If you want to explore putting your home in a trust it's best to consult with an attorney that's specialized in trusts and estate planning.