Putting a house in trust is a way to ensure that your home legally transfers to the beneficiary of your choice when you die. This estate planning option helps avoid probate and helps keep your finances private.
Why put a house in trust?
A trust is a fiduciary arrangement, which means it protects and serves the interests of someone else. Putting your house in trust helps ensure that after you die, ownership of your house passes smoothly and quickly to the person(s) you choose.
A trust accomplishes this smooth transfer of ownership in three ways:
Trusts don’t have to go through probate. Probate is a court process during which a judge determines the validity of a deceased person’s will and oversees the distribution of their assets. Probate can be a long, expensive and involved process, which can delay beneficiaries from taking possession of assets you want them to have. When you put your home in trust, your trustee can likely skip probate and your beneficiary can take possession of the house faster, without the probate court getting involved.
Trusts can help keep your affairs private. Unlike wills, which are usually subject to the probate process, trusts aren't public record. This can help avoid family disputes, hurt feelings, squabbles and challenges to your wishes — as well as keep your family's business out of public view.
Trusts can help make your trustee’s job easier. Not having to navigate a complex probate process simplifies your trustee’s responsibilities and makes their life easier — especially at a time when your trustee may be grieving your loss.
» MORE: 5 things to know about probate court
🤓Nerdy Tip
Putting your house in trust could have significant tax implications, depending on the type of trust you set up and your situation. Consult with an estate planning attorney before placing your home in a trust.
How to put your house in a trust
While specific trust laws vary from state to state, putting a house in trust involves these three basic steps:
Decide what type of trust you’d like to have. For example, you may want the trust to be revocable or irrevocable.
Choose your trustee(s) and beneficiaries. Consider naming backups in case your trustees or beneficiaries die before you do.
Create the trust document. Make sure it has all the required signatures/notarizations for your state. You can do this by working with an attorney or using an online service. If you have multiple beneficiaries, be clear about who gets the house.
Get copies. Give your trustee a copy of the most up-to-date version of your trust.
Fund the trust. You’ll likely need to transfer ownership of your home to the trust by creating a new deed for your property that gives full ownership of the house to your trust.
Update your county’s property records by giving it a copy of the new deed showing that the trust owns your home.
» MORE: How a power of attorney works
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Advantages of putting a house in trust
Putting your house in trust offers a number of advantages, including:
Avoiding probate. Trust assets typically aren’t subject to probate, which can eliminate time and expense.
Speed. Your beneficiaries won’t have to wait for the probate court. Generally, they can take possession of the house sooner than they would have otherwise.
Privacy. Trust assets don't become public record the way probated assets do.
Protection of assets during the trust creator’s lifetime. If you become incapacitated, the trustee’s job is to maintain the house on behalf of yourself and the person you've chosen to inherit it.
Estate tax and creditor advantages. Placing your home in an irrevocable trust may have estate tax advantages and potentially shield the asset from creditors.
» MORE: How Lady Bird deeds work
Disadvantages of putting a house in trust
Before placing your home in trust, it’s also wise to consider these drawbacks:
Expense. Creating and maintaining a trust is typically more expensive than creating a will.
Loss of control. If you create an irrevocable trust, you typically cannot change the terms of the trust or change the beneficiaries. (If you create a revocable trust, you usually can change the terms of the trust and change the beneficiaries while you're alive.)
Other assets may still be subject to probate. Putting your house in trust doesn’t protect assets outside of the trust from probate. So if you want to avoid probate completely, you may want to move your other assets into the trust as well. You may also consider getting a pour-over will or setting up payable on death accounts, transfer on death deeds or joint tenancy deeds. In addition, IRAs, 401(k)s and life insurance policies usually require account holders to name beneficiaries, and those designations typically allow the money in those accounts to avoid the probate process.
» MORE: The 7 steps of estate planning
