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The first reason is that they want their family to be able to inherit their home without having to go through the long, stressful, and expensive probate court process. Both of these documents let you specify which of your loved ones should receive your assets after you pass. However, with a last will and testament, your assets must go through probate court before your family can receive them.
Legal
Often, the benefits outweigh the downsides but it’s best to talk with an attorney to find out if trust creation is right for you. A number of problems can arise when transferring property to a trust. This could happen if the owner sold a house that had been transferred to the trust, but then bought a new house and failed to transfer it into the trust. Any new real estate purchases should be recorded with the trust as the owner. If this step is neglected before the estate owner dies, there is no way to avoid probate.
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A property trust is a legal entity that allows property to be passed from the person who created the trust (the grantor) to the person they want to inherit their property (the beneficiary). A trustee oversees the trust and manages the assets in the trust on behalf of the beneficiary, according to the grantor’s instructions. You put assets into a trust, which becomes the legal owner of the money or property transferred into it. You also choose a trustee, who is in charge of managing the assets and using the money or property for the designated purpose.
Keeping Your Financial Affairs Private
You and any other current owners of the property who are transferring the property into the trust need to sign the deed in front of a notary public who will stamp it with their seal. Notarizing a document helps make it legally valid and ensure that everyone is who they claim to be. “This is often done to ensure that future generations will benefit from the home,” says Rob Fricker, an estate planning attorney in Milwaukee. Before moving forward in the legal process, be sure your mortgage loan is squared away. Refinancing may be an option you’ll want to consider before putting your house in a trust. Explore your refinance options to see what you qualify for or talk with one of our Home Loan Experts today.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. Putting your property in a trust can be a smart way to ensure smooth transfer of ownership to your beneficiaries after your death, safeguard the property from creditors and lawsuits and avoid probate.
Costs Associated with Putting a House in a Trust
The probate process will ensure your assets are distributed according to your will – or, if you died without a will, according to your state’s inheritance laws. You may be able to act as the trustee of your own revocable living trust, but should name a successor trustee who will manage assets after your death or in case you become incapacitated. When choosing a trustee to manage your assets, you should select someone who you can count on to follow your wishes and safeguard your wealth. An estate planning attorney can guide you through the entire process and help to ensure that you get the full benefits of trust creation. Another way to give someone your house is with a transfer-on-death deed.
Putting A House Into A Trust - What Are The Benefits?
This can take months, sometimes even years if your will is contested in court. It is often possible for a trust owner to create a quitclaim deed without the help of an attorney. The other type, a warranty deed, involves a guarantee that the person transferring ownership has the right to do so and that no outstanding liens will interfere with the transfer. Stock and bond transfers are generally handled through a brokerage or the financial institution that is holding them for the owner. Instead, the beneficiary designations of the policy may be changed to name the trust as the recipient of the payout.
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Any income you receive from property that you are holding in the trust will simply be reported on your personal tax returns. However, if you transfer property in or out of the trust, you need to keep accurate written records. This isn’t difficult, but it’s easy to forget if it has been a few years since you created your trust. The advantages of putting a house into a Trust far outweigh the disadvantages. This is why it is one of the best, simplest, and most commonly used methods for avoiding financial disaster and your passing assets to your loved ones after you’re gone.
Doing so can make it easier to manage and distribute your assets — including your home — after your death. Learn more about how a trust works, different types to consider, the pros and cons of putting your home in trust and more. Additionally, if the trust only holds your house, you’ll still have other assets that need to go through the probate process, so you can’t truly bypass probate completely.
You might choose to put just a few vital assets, such as your house, in a trust and have everything else be decided by your will. This can help ensure a speedy transfer for your most important assets while the rest of your estate goes through the normal probate process. It can take time and cost money to create this type of legal arrangement. You may also need to give up some control over your assets if you are hoping to get the maximum protection for your money and property.
You will need to formally transfer the ownership of your assets to the trust in order to benefit from this type of arrangement. It is also prudent to have a durable power of attorney for finances in addition to a living trust to grant the new acting trustee the power to manage any property and finances outside of the trust. If the trust is set up as an individual trust, then the trustee can take over and manage the assets. If the trust is owned by a married couple, then the second spouse will usually step in as the acting trustee. Further, creating a trust in California also safeguards your documents from the public eye. Privacy laws require the information in the trust to remain confidential.
This type of trust can't be changed or revoked, so know that once you transfer real estate into the trust it may be difficult to retitle it back in your name or someone else's. However, irrevocable trusts can offer you tax benefits and asset protection as the grantor, since you’re no longer the legal owner of any trust property. In order to avoid probate court, your assets need to be placed into a living trust.
There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest. We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors. Working with a professional to put your home in a trust is certainly advisable.
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