How to Put a House in a Trust

Why put your house in a trust? Key benefits

Trusts are a common estate planning tool because they protect your assets and ensure they are distributed correctly to your beneficiaries. But while they function similarly to a will, a trust is a more flexible arrangement and may offer some key benefits that wills do not, specifically as it relates to taxes. 

Here are some of the most common reasons people choose to put their house into a trust:

Avoiding probate court

Probate is a legal process in which a judge oversees the distribution of a person’s estate. The probate process has a reputation for being both time consuming and expensive, even in situations where a person leaves behind a detailed will.

Trusts, on the other hand, avoid the probate process because the trust takes ownership of any assets you put into it and these assets are no longer part of your estate. Bypassing the probate court allows your beneficiaries to gain ownership of your property quicker and with fewer obstacles.

Privacy preservation

Another benefit to putting a house into a trust is it keeps the details of the arrangement private. Wills, on the other hand, become part of the public record once they go through the probate process. If you wish to protect the details of your real estate holdings and your beneficiaries from public scrutiny, a trust can help you do that.

Asset protection

Certain types of trusts can protect your assets from creditors, so your real estate can’t be seized as payment for a debt. This is because you transfer ownership of your assets when you put them into the trust, allowing the trust to act as a legal barrier between creditors and your home.

Estate tax advantages

Some trusts, especially irrevocable trusts, offer attractive tax benefits for you and your beneficiaries. Estate taxes—sometimes called inheritance taxes—can be anywhere from 18% to 40%, but because assets held in a trust are no longer part of your estate, this arrangement can minimize how much your beneficiaries will pay or even help them avoid paying estate tax altogether. By comparison, most wills offer little to no tax protection.

How to put your house in a trust in 5 steps

If you’re thinking about putting your home into a trust for estate planning purposes, you’ll likely follow some version of these basic steps:

Step 1: Consult an estate planning attorney

While it may be possible to put a home in a trust yourself, it’s advisable to consult an experienced estate planning attorney to help you. Not only will they be able to help you navigate the tax implications of putting real estate into a trust, but they will also understand any state-specific requirements you may need to consider. With an asset as valuable as your home, small mistakes can be costly.

Step 2: Choose the appropriate type of trust

There are many different types of trusts you may consider, but the two most common are revocable and irrevocable trusts.

True to their name, revocable trusts may be revoked or changed at any time. Revocable trusts are extremely flexible, allowing you to transfer assets in and out or change beneficiaries as you please. You also have the option to name yourself as the trustee in a revocable trust, which allows you to retain ownership of your assets.

This level of flexibility can be appealing to those who anticipate that their estate planning needs or wishes may change over their lifetime. However, a revocable trust does not offer the tax benefits and asset protection benefits that an irrevocable trust does, though it does still allow for the avoidance of probate.

Unlike a revocable trust, an irrevocable trust cannot be easily amended or revoked. And with this type of trust, the grantor typically doesn’t serve as their own trustee or retain ownership of the home. But that lack of flexibility comes with several benefits, such as protecting the home from creditors and allowing your beneficiaries to avoid hefty estate taxes. If these benefits are your primary reason for putting your home in a trust, an irrevocable trust is likely your best option.

It’s also important to note that revocable trusts become irrevocable trusts upon the grantor’s death. For that reason, you may wish to regularly review the terms with your estate planning attorney to ensure it’s as up to date as possible.

Step 3: Draft the trust document

Your attorney can help you draft your trust agreement, which is a document that outlines the terms of your trust. It also names your beneficiaries and a trustee. The trustee is an individual who will be responsible for managing the trust assets and ensuring the terms are carried out correctly. If you choose to name yourself as the trustee, you’ll also have the option to designate someone to take over that responsibility after you pass away.

Step 4: Transfer the property title

Putting your home into a trust necessitates getting a new deed in order to name the trustee as the new property owner. Typically, you must sign the deed in front of a notary public. In addition, if you are married but hold property in your name alone, your spouse may need to sign off on the deed transferring title.

There are various types of property deeds you could use to transfer your home into your trust. The two common deeds are warranty deeds and quitclaim deeds. 

• When you sign a warranty deed, you are guaranteeing that you have the legal right to transfer title into the trust.
• A quitclaim deed, on the other hand, doesn’t come with the same guarantee. Many people choose to use a quitclaim deed when there is no doubt as to who holds ownership of the home.

A third option in many states is a transfer on death deed or a beneficiary deed. Unlike a warranty deed or quitclaim deed, this type of deed does not transfer ownership immediately, but rather, upon your death.

Your estate planning attorney can help you choose which type of deed is right for you and should fill in the deed for you. They’ll also record or file the deed for you at the county recorder's or Registrar of Titles' office. 

Step 5: Update your insurance and mortgage information

Putting a house into a trust doesn’t affect the mortgage terms or insurance policy, but it can still be a good idea to notify service providers of the legal change of ownership. Your attorney can advise you as to whether it’s best to do this before or after your trust has been completed.

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

The costs involved in setting up a trust can vary widely based on a few factors. Upfront costs can be cheaper if you set the trust up yourself rather than using an attorney—however, your ability to complete this yourself will largely depend on how complicated your estate plan is and how much time you’re willing to invest in the process.

Even if you do take a DIY approach, you’ll still likely need to pay a recording fee at your county recorder’s office, which can vary widely depending on your jurisdiction. Remember: mistakes can be costly, so you can always have your DIY estate plan reviewed by an attorney, which will likely be less costly than hiring one to draft it for you.

As a general rule of thumb, you can expect to pay anywhere from a few hundred to a few thousand dollars to set up your trust.

Other considerations before putting your house in a trust

There are many potential benefits to putting your house in a trust, but it’s still not for everyone. Here are a few additional things to consider before you make a decision:

• Your estate may not be able to avoid probate entirely. Bypassing the court process is the primary reason why many people choose to put a house in trust, but any other assets not in the trust will still be subject to probate.
• It can make selling your home a little more complicated. Selling a home in a revocable trust is fairly straightforward since you can change the terms of your trust at any time. But selling a home in an irrevocable trust could come with complicated tax implications that will require you to seek the advice of a legal professional.
• It may be hard to undo. While revocable trusts are easy to change, irrevocable trusts are difficult to alter and may require you to spend a lot of money on legal fees.

FAQs

Can I put my house in a trust without a lawyer?

Putting together your own trust might allow you to save money on legal fees, but it's not without its downsides. Trusts can be fairly complex legal agreements and filing requirements can vary by location. Using a legal professional to help put together your trust ensures everything is handled correctly.

Will putting my house in a trust affect property taxes?

Whether putting your house in a trust will affect your property tax is largely a matter of how property tax is handled within your specific state. In some cases, a transfer of ownership can trigger a property tax reassessment, while some states have specific laws to prevent this from happening. If you want more information about how your property tax may be impacted, it’s best to consult an attorney.

What happens if I refinance my house while it’s in a trust?

Refinancing a home in a trust is easier if you have a revocable trust since you can simply move the house out of the trust for the refinance. Refinancing a house in an irrevocable trust can be a lot more complicated and may require getting permission from the mortgage lender. For that reason, it can be a good idea to refinance before you put your home into a trust.

Can a trust hold multiple properties?

If you own real estate beyond just your primary residence, you can put it into the same trust, or separate your properties into multiple trusts. If your estate plan is fairly straightforward and you don’t anticipate any family disputes, a single trust may be adequate for your needs. But if your situation is more complicated, having multiple trusts may help you better divide your assets and plan for a smooth transfer after you’re gone. As always, a dependable estate attorney can help you decide on a plan that works best for you.