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Putting a House in Trust: Why, How, Pros and Cons

Roberta Pescow

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Table of Contents

Why put a house in trust?

How to put your house in a trust, advantages of putting a house in trust, disadvantages of putting a house in trust.

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.

A trust is a fiduciary arrangement, which means it protects and serves the interests of someone else [0] Cornell University Legal Information Institute . Trust . Accessed Dec 18, 2023. View all sources . 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 [0] American College of Trust and Estate Counsel . What is a Revocable Trust and Do I Need One? . Accessed Dec 18, 2023. View all sources .

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

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.

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

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 [0] National Council on Aging . Living Trust vs. Will: Key Differences . Accessed Dec 18, 2023. View all sources .

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 [0] National Council on Aging . Living Trust vs. Will . Accessed Dec 18, 2023. View all sources . 

» MORE: How Lady Bird deeds work

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

On a similar note...

transfer of property in trust

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transfer of property in trust

A DIY guide to transferring assets into a living trust

You may have established a living trust, but it's not functional until you transfer ownership of your assets to it.

Find out more about Living Trusts

transfer of property in trust

by   Brette Sember, J.D.

Brette Sember, J.D., practiced law in New York, including divorce, mediation, family law, adoption, probate and estat...

Read more...

Updated on: February 9, 2024 · 10min read

Key takeaways of a living trust

Understanding the benefits of a revocable living trust, preparing to transfer your assets, transferring real estate into your living trust, assigning financial accounts to the trust, ensuring personal property is included, life insurance and living trusts, business interests and your trust, overlooked assets and uncommon considerations, regular review and updating of your living trust, frequently asked questions.

Need to transfer assets to a living trust? This guide provides detailed, practical steps to re-title your assets and secure your estate’s future: Learn exactly how to transfer assets to a living trust, avoiding any unnecessary confusion or legalese.

A woman, man, and their two children smile and embrace one another. To safeguard your family after your death, consider transferring assets into a living trust.

  • A living trust is beneficial for avoiding probate, maintaining privacy in asset distribution, and providing long-term savings by minimizing legal and probate-related expenses.
  • Assets must be carefully prepared for transfer into a living trust, requiring an inventory of assets, legal ownership changes, and coordination with financial institutions and insurers.
  • Regularly reviewing and updating your living trust is crucial to ensure it reflects current life circumstances and asset distributions remain aligned with your intentions.

A revocable living trust is a legal mechanism that allows the transfer of assets to a trustee for management and eventual distribution to beneficiaries upon death or at a designated time. This process bypasses the often-time-consuming probate process, thereby maintaining confidentiality in asset distribution and offering asset protection.

Although the initial expense of establishing a living trust exceeds that of creating a will, it can result in substantial long-term savings through minimizing or eliminating costs associated with:

  • other related expenses

Investing in the establishment of a living trust is a pivotal move in creating a comprehensive estate plan, ultimately ensuring the preservation of your assets’ value for your heirs.

A woman wearing a wedding ring stands behind a seated man and embraces him.

Before you can enjoy the benefits of a living trust, there are necessary steps to take to prepare your assets for transfer. It’s crucial to classify your assets into four primary types:

  • Real property
  • Cash accounts
  • Financial instruments
  • Tangible personal property

To transfer ownership of these assets requires a change in legal ownership from your own name to the trust’s name, effectively funding the trust.

Assets eligible to be placed into a living trust include but not limited to:

  • Real estate
  • Financial accounts such as stocks and bonds
  • Life insurance policies
  • Business interests
  • A diverse array of personal property

Before beginning the process to transfer assets into a living trust, it’s vital to compile a detailed inventory of all assets intended for the living trust to avoid any oversights during the transition.

Moving real estate into your living trust is an integral part of the asset transfer process. This can be accomplished through the use of a deed, such as a quitclaim or warranty deed, which should be executed and recorded properly. Moreover, consulting with a title insurance company to verify the accuracy of the deed transfer is vital.

Deed preparation and execution

The process of transferring real estate to a living trust begins with deed preparation. This process includes locating the original property deed, acquiring a new deed, obtaining notarization for the new deed, and ultimately submitting the new deed to the relevant office for filing. If the property is part of a homeowners association, or if there’s a mortgage on the property, you may also need to obtain permission from the respective parties.

The execution of the quit claim deed often involves signing the deed in the presence of a notary, and subsequently recording it with the relevant government office to formalize the transfer. A quitclaim deed serves as a legal mechanism for transferring the property owner’s interest to the living trust.

Coordination with mortgage lender and insurance company

Alongside deed preparation and execution, coordinating with your mortgage lender and insurance company is a critical component of transferring real estate to a living trust. This coordination is essential to ensure proper documentation and coverage. It’s advisable to proactively seek approval from the mortgage holder before proceeding with the transfer.

Failing to inform a mortgage lender about transferring real estate into a living trust could potentially activate the acceleration clause, prompting the lender to demand immediate repayment of the mortgage. It’s also advisable to reach out to your insurance agent or broker, who will guide you through the process and provide any required documentation or information. Transferring a home into a living trust generally does not impact the homeowner’s insurance policy, but it’s crucial to add the trust as an ‘additional insured’ on the policy to ensure continued protection for the property.

A woman sits at a kitchen counter and takes notes on living trusts. Assigning financial accounts to the trust constitutes another vital step in the process of transferring assets to a living trust. .

Assigning financial accounts to the trust constitutes another vital step in the process of transferring assets to a living trust. This includes:

  • Bank accounts
  • Brokerage accounts
  • Health savings accounts
  • Other financial instruments

Bank accounts and brokerage accounts

Financial assets such as investments, bank accounts, money market accounts, or stock certificates can indeed be transferred to a living trust. This process involves reaching out to the relevant institutions and fulfilling any necessary paperwork. For instance, transferring bank accounts to a living trust involves either closing the current account and reopening a new one in the name of the trust or, in the case of CDs, waiting for them to mature and using the funds to open a new CD in the trust’s account.

Similarly, transferring a safe deposit box to a living trust can typically be accomplished without the necessity of closing and reopening the box. If your bank requests copies of the trust documents prior to opening accounts in the name of your trust, it is advisable to furnish the required copies to ensure compliance with the bank’s policies.

Handling retirement and medical savings accounts

Retirement and medical savings accounts have specific rules and restrictions when it comes to being transferred into living trusts. Transfers of individual retirement accounts may be treated as distributions by the IRS, potentially resulting in income tax obligations on the transferred amount.

The process of transferring retirement accounts into a living trust can be intricate and may not be suitable in certain circumstances. It is prudent to seek guidance from an estate planning attorney before proceeding.

It is generally not recommended to transfer retirement accounts such as 401(k), IRA, 403(b), and certain qualified annuities directly into a living trust. This is due to potential tax implications and complex regulations associated with these accounts. Instead, you can designate a successor trustee of your trust as a beneficiary for these accounts.

A man and woman sit on one side of a desk examining living trust documents while an estate planning attorney sits opposite them and explains.

The inclusion of personal property in your living trust is equally important as the transfer of real estate or financial accounts. This involves listing specific items and creating general assignments.

Specific items and general assignments

Personal property can be transferred to a living trust by specifically naming the items in the trust document and indicating that their ownership is being transferred to the trust. This includes categories of personal belongings such as:

  • collectibles
  • other tangible personal property

A general assignment within a living trust involves the transfer of ownership of a wide range of personal assets into the ownership form the trust. This allows for the inclusion of assets without title documents or assets that were not retitled, ultimately helping to bypass probate for those assets and ensuring they are governed by the trust.

Life insurance policies can play a unique role when it comes to living trusts. The transfer of a life insurance policy to a living trust involves transferring ownership of the policy to either another adult or the named beneficiary, or creating a trust and designating it as the beneficiary designation.

Contemplating the potential loss of creditor protection is crucial before proceeding with the transfer of a life insurance policy to a living trust. It is advisable to seek guidance from a legal professional or accountant in order to fully comprehend the potential tax implications.

Transferring business interests to a trust can be beneficial for a variety of reasons, including alleviating your family from the responsibility of your business debts and potentially minimizing the tax liability on your estate. Nevertheless, reviewing relevant business documents for guidance and transfer limitations, such as partnership agreements, operating agreements, or articles of incorporation, is crucial.

The process for transferring a business name between interests varies depending on the type of business. Here are some examples:

  • Transferring a partnership interest to a living trust may require obtaining approval in accordance with the terms of the partnership agreement or operating agreement.
  • Transferring business interests from an LLC owner to a living trust typically involves obtaining approval from a majority of owners.
  • Transferring a sole proprietorship into a living trust is usually straightforward as business assets are typically in the owner’s name, providing protection for the family from business liabilities.

Estate planning involves considering all types of assets, including those that are often overlooked or uncommon. Certain assets, like IRAs, are not eligible to be held by a trust, but they can be designated as a beneficiary. A pour-over will functions as a mechanism for transferring any remaining assets into a living trust upon the trustor’s death, although it does require undergoing probate proceedings.

When planning your estate, it’s important to consider whether to designate a trust as the primary or secondary beneficiary for accounts with beneficiary designations, such as savings accounts. This ensures that the assets within these accounts are properly managed and distributed according to the terms of the living trust.

Examples of commonly overlooked assets and less typical considerations include funeral trusts , sub-trusts for specific family scenarios, and different types of trusts, such as children’s trusts and generation-skipping trusts.

A woman in a wheelchair reads an iPad as a nurse stands behind her guiding the chair. Make sure to keep your living trust current and effective, responding to life events and changing circumstances.

The process doesn’t end once your living trust is established and funded. Continually reviewing and updating your living trust is necessary to keep it current and effective, responding to life events and changing circumstances.

It is advisable to review your trust at least annually or following any major life events such as:

  • the birth of a child
  • the death of a beneficiary

Changes in circumstances, such as shifts in your financial landscape or family dynamics, require revisions to the trust to accurately reflect your current situation and intentions for your estate.

The creation and maintenance of a living trust can be an effective strategy to ensure a smooth transition of your assets to your beneficiaries. Whether it’s real estate, financial accounts, personal property, life insurance policies, or business interests, a living trust provides a comprehensive solution for managing your estate. However, it’s vital to remember that this is an ongoing process that requires regular review and updates in response to life events and changes in circumstances.

How are assets transferred to a trust?

Assets can be transferred to a trust through methods like a deed of grantor(s) to trustee(s), title transfer, assignment of ownership, opening new accounts, naming the trust as a beneficiary, and more. Transferring assets to a trust can be done through various legal means, providing flexibility to the grantor.

What assets should not be in a trust?

You should not put assets like retirement accounts, health savings accounts, life insurance policies, and vehicles in a trust. These types of assets generally have cash value and should not go into a living trust.

What are disadvantages of putting property in trust?

Placing a property in trust can lead to extra paperwork and potential tax burdens. Additionally, not all trusts offer protection for other assets from creditors, as revocable trusts do not protect assets from creditors.

Are transfers to a trust taxable?

Transfers to a trust are not subject to income tax, including gifts to trusts and distributions of principal from trusts to beneficiaries. The gift tax and estate tax are the transfer taxes relevant to trusts.

What are the benefits of a living trust?

A living trust offers benefits such as bypassing probate, maintaining privacy, providing asset protection, and potentially offering tax benefits. Consider setting up a living trust to take advantage of these benefits.

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How, and why, to put your home in a trust

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When you purchase and own a home, your name is on the title to the property , indicating ownership. But you can transfer ownership of your residence to another person or entity in the form of a real estate trust.

Why would you want to put property in a trust? Doing so can make it easier to manage and distribute your assets — including your home — after your death. It can have legal and tax benefits, too. Learn more about how a trust works, different types to consider, the pros and cons of putting your home in trust and more.

What is a trust?

A real estate trust is a legal arrangement in which the owner of a home, known as the “grantor” or “settlor,” transfers ownership of the property to another entity or individual, known as the “trustee.” The trustee holds and manages the property for the benefit of the grantor and any named beneficiaries of the grantor’s estate.

“Putting your home in a trust simply means transferring ownership of your home into a trust you have created with a trust agreement,” says Salt Lake City–based real estate and estate planning attorney Justin Cutler. “You transfer your home to the trust by signing a deed that names the trustee as the new owner of the property. The deed then needs to be recorded with the local county recording office. Once recorded, the trustee is now ‘on title’ as the legal owner of the property.”

Typically, the original owner of the home names him- or herself as the trustee so that they can maintain control of the property. Or, the original owner can name someone else as the trustee, such as a relative, friend or attorney, which can be helpful in case the original owner passes away. Trustees are frequently adult children of the homeowner, who will inherit the property upon the homeowner’s death.

“This is often done to ensure that future generations will benefit from the home,” says Rob Fricker, an estate planning attorney in Milwaukee.

Revocable trusts vs. irrevocable trusts

Trusts are often used for tax, estate planning or asset protection purposes, as — depending on the type of trust — the property can be protected from creditors and can pass directly to the beneficiaries without going through probate court, says Philadelphia-based attorney Min Hwan Ahn. There are two primary types of trusts that pertain to real estate: revocable and irrevocable.

Also often called a living trust, a revocable trust can be amended or dissolved at any time by the grantor/creator of the trust. “A revocable trust allows the grantor to retain control over the property and make changes to the trust during their lifetime,” says Ahn. “The grantor retains the right to modify or dissolve the trust. They can act as the trustee and manage the property themselves or appoint someone else to do so.”

A revocable/living trust is similar to a will , because it stipulates the original homeowner’s wishes upon death. When the grantor passes away, the property in the revocable trust is distributed to the grantor’s beneficiaries, per the terms of the trust agreement.

An irrevocable trust, as the name implies, is more permanent. It cannot be dissolved or changed by the grantor after it has been created, unless the beneficiaries grant consent.

Other types of trusts

Revocable and irrevocable are the two most popular trusts used for real estate purposes, says Ahn, but there are others. These include:

  • Charitable trusts , which are used to provide for a charitable organization or cause, with the property passing to the charity upon the grantor’s death.
  • Special needs trusts, often used by and for individuals with disabilities to ensure that their assets and property are protected and used for their benefit.
  • Life insurance trusts, created to manage life insurance policies for estate planning purposes, ensuring that death benefits are distributed based on the grantor’s wishes.

Pros and cons of putting your house in a trust

Putting your home in trust can provide several perks that make this method of ownership transfer worthwhile.

  • Estate planning: The main benefit of putting your home in a trust is that it bypasses probate court after the original homeowner (grantor) dies. That means ownership of the home can be transferred more quickly, and more privately. “If a homeowner puts their home in a trust, then upon their death, the successor trustee will have the legal authority to sell the home without having to file in probate court,” Cutler says. “Probate court can cost thousands of dollars and may take more than a year to complete, so putting your home in a trust is a great way to avoid all of that.”
  • Asset protection: Assets within an irrevocable trust are protected from lawsuits and creditors. “The property in the trust is no longer considered the homeowner’s personal property. It’s instead held for the benefit of the trust’s beneficiaries,” says Ahn.
  • Tax savings: Trusts can offer tax advantages in certain circumstances. For example, an irrevocable trust may be eligible for a stepped-up tax basis upon the grantor’s death, possibly reducing estate taxes and capital gains taxes when the property is sold. “A revocable trust does not have any tax benefits, since it is generally not a separate entity with its own tax ID number,” says Cutler.
  • Continuity of ownership: Trusts can also ensure that a property is passed down to future generations without the need for a formal transfer of ownership. “This can help preserve family assets and maintain ownership continuity,” Ahn says.

Disadvantages

But putting your home in a trust has its downsides, too.

  • Legal fees: It can be costly to establish and maintain a trust, because it typically involves legal fees and ongoing administration costs. “Upfront costs can range from $500 for a do-it-yourself option to several thousands of dollars to hire an attorney,” Cutler says. “Revocable trusts do not require annual maintenance or renewal fees once the home is in the trust. But for more complex irrevocable trusts that require a separate tax ID number, you may need to make annual tax filings for the trust.”
  • Loss of control: Trusts are often complex legal arrangements that require a detailed understanding of the law and how trusts work. “This can make it difficult for the average person to manage their own trust,” says Ahn. You may need ongoing legal advice.
  • Permanence: In the case of an irrevocable trust, the terms cannot be amended or revoked once it is established. “Also, depending on the terms of the trust, the homeowner may have limitations on their ability to use the property, such as restrictions on renting it out or making improvements to it,” Ahn says.

How to put your home in a trust

Whichever type of trust you choose, creating a real estate trust is best done with the help of an attorney. Here’s a breakdown of the basic steps involved:

  • Choose a trustee (yourself or another individual, such as a trusted relative, friend or attorney).
  • Decide on the terms of the trust, and create and sign a trust agreement.
  • Sign a deed that names a specific trustee as the new owner of the property.
  • Send the deed to the county recorder’s office to be recorded, You will likely have to pay a recording fee. Once recorded, the property is now in the trust and is legally binding.

Bottom line

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. But it can be complicated — and expensive. Consult closely with an attorney on your options, and carefully consider whom you might want to name as trustee before committing to a trust.

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How to Transfer Property into a Trust

Calculator with wooden house and coins stack and pen on wood table. Property investment and house mortgage. Concept for How to Transfer Property into a Trust.

A trust is a strategic estate planning tool that can help to ensure your wishes are upheld after your passing. They can also be used to minimize tax consequences and preserve assets for future generations. However, a trust must be properly created and fully funded in order to be valid. If assets or property are not transferred into the trust, it will not serve its intended purpose. It’s important to understand how to transfer property into a trust so the assets will be distributed to your desired beneficiaries.

What is a Trust?

A trust is a legal arrangement in which a third party (the trustee) holds and manages property on behalf of a beneficiary. The trust is created by the trustor, also referred to as the grantor. A trust can be arranged in many different ways and for a variety of purposes , depending upon the creator’s objectives and financial goals. Trusts may be revocable, which means they can be modified and amended during the lifetime of the creator. Or they can be irrevocable — meaning, the grantor relinquishes the ability to make any changes.

How is a Trust Created?

There are two main steps to setting up a trust. First, the trust instrument must be drafted. This is the legal document that designates the grantor, trustee, and beneficiaries. It also specifies how you wish the trust assets to be managed — as well as to whom and under what conditions you wish them to be distributed. The written instrument may also bestow certain powers and responsibilities to the trustee.

The second step in creating a trust is funding it. A trust instrument by itself is void if property is not transferred into the trust. In other words, a trust that has no assets placed in it is similar to a new bank account that does not contain any funds.

A trust can be funded with the following types of property and assets:

  • Real estate
  • Financial accounts
  • Stock certificates
  • Annuity certificates
  • Life insurance
  • Business interests
  • Collectible vehicles
  • Personal property
  • Jewelry and art

A trust can be set up in as little as several days to a few weeks, depending upon the complexity of the assets. Although a trust instrument may be drafted expeditiously, the process should not be rushed. It’s crucial to take the time to determine your objectives for the trust and discuss your goals with an experienced trust attorney.

The way in which a trust is funded — and how assets are transferred into the trust — will depend upon the type of property the grantor intends to distribute. For instance, personal property is relatively simple to transfer into a trust. It merely requires a signed statement that lists the assets being transferred. If the personal property is titled in the grantor’s name, such as a boat or a motor vehicle, it must be transferred with the correct type of deed.

Real estate can be transferred into a trust by a deed that transfers title from the grantor to the name of the trust. Under California law, a Preliminary Change of Ownership Report must be filed simultaneously with the deed at the county recorder’s office in the county where the real property is situated. This lets the county assessor’s office know about the transfer so that the value of the property can be reassessed, if applicable. Typically, real property transferred to a living trust will not be reassessed.

It should be noted that a trust deed in California is not the same as a transfer of real estate. Instead, it serves as a record of an encumbrance or mortgage on real property. Specifically, it is used to create a financial institution’s security interest in a particular property in the event it is lending money to the property owner.

How is Property Transferred Out of a Trust?

After the grantor has placed their property into the trust, it will remain there until the condition specified in the trust document occurs. Significantly, an irrevocable trust functions in a very different way from a revocable trust. While a grantor typically names themselves as the trustee of a revocable trust, assets can be transferred in and out as they wish. But with an irrevocable trust, the grantor loses all control once the property has been transferred and the trust is fully funded.

Trusts can help to avoid going through the probate process in California. Rather, the trustee will distribute the property and administer an irrevocable trust according to the terms outlined in the instrument. Distribution can be fairly simple if the trust instrument identifies the precise amount that should be disbursed to each beneficiary — percentage distributions can be more complex as they require the trustee to first establish the fair market value. A grant deed is used to transfer real estate out of the trust to the designated beneficiaries.

Contact an Experienced California Trusts, Estates, and Probate Attorney

If you are considering setting up a revocable or irrevocable trust, it’s vital to have the assistance of a skillful trust attorney. At White & Bright, LLP, we offer solid advice and experienced representation to clients in California who wish to create various types of trusts to ensure their financial objectives are met. We welcome you to contact or call us at (760) 747-3200 to learn more about our legal services.

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Putting A House Into A Trust

The pros and cons explained, putting a house into a trust - is it a good idea.

Over the past decade at Rochester Law Center , we’ve helped 1,000s of clients estate plan. Some of the most common questions we get asked are about living trusts. In this article, we’re going to cover some of the pros and cons of putting a house into a trust .

putting a house into a trust

Additionally, we’re going to answer some common questions asked frequently about putting a house into trusts, who owns your home after putting a house into a trust, and what you can and can’t do with your property after it’s in your trust.

Putting A House Into A Trust Or Last Will And Testament?

Estate planning is about creating a custom plan to allow you to transfer your money, property, and assets to your family in the most efficient way possible. The two most common estate planning documents are the last will and testament and the revocable living trust .

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. This can take months, sometimes even years if your will is contested in court.

On the other hand, a living trust avoids probate court. This means that your family can receive your money, property and assets in a matter of days or weeks after you pass instead of months or potentially years.

Putting A House Into A Trust - Why Do People Do It?

There are two main reasons why people put a house into a trust. 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.

Instead, their home can be transferred to their heirs in a private setting shortly after their death.

The second reason deals with planning for incapacity. It’s a common misconception that estate planning only plans for death, but comprehensive estate planning plans for incapacity as well. When you create a living trust, you will name a successor trustee. This person is responsible for distributing your assets to your heirs after you die. They are also responsible for stepping in and managing the assets in your trust if you become incapacitated and can no longer communicate. By putting a house into a trust, you can ensure that one of your most important assets will be managed and taken care of by someone you trust in the event you become incapacitated.

Putting A House Into A Trust - How Does It Work?

In order to avoid probate court, your assets need to be placed into a living trust. This called funding the trust. When you create a living trust, you are known as the settlor or grantor, depending on what state you live in. When you set up the living trust, you also assign yourself as the trustee. The trustee is the person who has the right to manage all of the money, property, and assets that are placed inside of the living trust. By naming yourself trustee while you are living, you maintain the ability to manage all of the assets in your trust just like you do now. For example, if you plan on putting your house into a trust, you can still sell it at any time in the future.

Additionally, you will name your beneficiaries in your revocable living trust. Your beneficiaries are your loved ones that you want to inherit your money and property after you die. Usually this is a spouse, children, grandchildren etc.

Lastly, you will designate your successor trustee. Your successor trustee is the person who will take over management of your living trust after you die or become incapacitated. They will be responsible for settling your estate and distributing your assets to your beneficiaries after you die. Additionally, if you are putting your house into a trust, the successor trustee is the person who will manage your home, and any other assets you placed in the name of your trust if you become incapacitated.

In the next section we will talk about all of the additional benefits of putting a house into a trust.

Putting A House Into A Trust - What Are The Benefits?

Avoid probate.

As mentioned earlier, one of the biggest advantages of putting a house into a trust is that, unlike a will, a living trust allows you to avoid probate court. There are three main reasons why this is important.

First, probate can be very expensive.

Probate is the legal process through which the court ensures that, when you die, your debts are paid and your assets are distributed according to the law. Legal fees, executor fees, inventory fees (county taxes), and other costs have to be paid before your assets can be fully distributed to your heirs.

If you own property in other states, your family could face multiple probates, each one according to the laws in that state. We usually expect about 10% of your estate to be eaten up in probate court through legal fees, inventory fees, court costs etc. For smaller estates, the percentage can be much larger – sometimes leaving little behind for your loved ones.

These costs can vary widely, but we’ve had clients who had to pay tens of thousands of dollars throughout the probate process. In general, probate is much, much more expensive than doing some simple estate planning in advance.

Second, probate can take a long time.

The standard probate process takes a minimum of 5 months to complete. However, over the past decade we’ve experienced that it generally takes 9 months to a year to resolve simple cases (and several years for contested cases). We once represented a client whose Probate lasted for 8 years.

Third, probate is public.

Your family has no privacy. Probate is a public process, so anyone can see the size of your estate (often what you actually owned), who you owed debts to, who will receive your assets, and when they will receive them. The process invites upset heirs to contest your will and can expose your family to greedy creditors and potential fraudsters.

Keep Your Financial Matters Private

Since there is no probate court process when you have a living trust, there is no need to make your assets public. On the other hand, if your house is only included in a will, the will’s contents are made public when it is entered in probate court.

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Since the trust avoids probate, the contents of the transfer stay private. In general, the only people who will ever see the living trust, are the beneficiaries that you name. And even then, only after you pass

Incapacity Protection

If you become incapacitated during your life, then a living trust can protect your family from undergoing a conservatorship. A conservatorship is when a court-appointed guardian is given the authority to manage an incapacitated person’s financial matters for them.

This feature of a living trust is especially comforting to families in times of difficulty since they do not have to worry about going to court and requesting access to the incapacitated person’s finances. A revocable living trust gives the family one less problem to face when someone becomes incapacitated.

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.

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.

Putting A House Into A Trust - What Are The Disadvantages?

While the benefits of putting a house into a trust greatly outweigh the drawbacks, it does have some additional complexities…

Additional Paperwork

In order to make your living trust effective, you need to make sure that the ownership of your house is legally transferred to you as the trustee. Since your house has a title, you need to change the title to show that the property is now owned by the trust. To do this you need to prepare and sign a new deed to transfer ownership to you as trustee of the trust. In the end, a little bit of additional paperwork and record keeping is worth much more than the time and money that will be lost in probate, not to mention the stress that your family will have to go through to access your assets after you pass.

Accurate Record Keeping

Once you create a living trust you don’t need separate income tax records if you are both the grantor and the trustee. 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.

Now that we have talked about some of the major pros and cons of putting a house into a trust, we are going to answer some additional questions we get from clients about putting a house into a trust.

One of the main questions we get is…

Is Putting A House Into A Trust Difficult?

Putting a house into a trust is actually quite simple and your living trust attorney or financial planner can help. Since your house has a title, you need to change the title to show that the property is now owned by the trust. To do this you need to prepare and sign a new deed to transfer ownership to you as trustee of the trust.

Besides Putting A House Into A Trust, Are There Other Assets I Should Consider Putting Into A Trust?

Aside from putting a house into a trust, there are other assets you should consider titling in the name of the trust. Usually it’s best to include all real estate, stocks, CDs, bank accounts, investments, insurance and other assets with titles. Some people also include jewelry, clothes, art, furniture, or other assets in a one page assignment.

Will I Lose Control Of My Home When Putting A House Into A Trust?

Not at all, you keep full control of all of the assets in your trust. As Trustee of your trust, you can do anything you could do before – buy and sell assets, gift them away, mortgage them out, and you can still change or even cancel your trust altogether. That’s why it’s called a revocable living trust. You even file the same tax return. Nothing changes but the name on the titles.

How Do I Set Up A Living Trust?

If you need help putting a house into a trust and you’d like to set up a living trust , we can help. Over the past decade, we’ve helped 1,000s of clients set up all matters of living trusts, wills, powers of attorney, and estate plans. We’d be happy to answer any questions you have about whether a living trust is the right estate planning option for you. Just give us a call today at (248) 613-0007 to schedule your complimentary consultation.

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Reserve your free estate planning consultation today, phone and web meetings available so you don't need to travel, when you call, tell our friendly receptionist you are calling to reserve an estate planning consultation. we will handle the rest, written by chris atallah - founder, rochester law center, pllc.

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Chris Atallah is a licensed Michigan Attorney and the author of “The Ultimate Guide to Wills & Trusts – Estate Planning for Michigan Families” . Over that past decade, Chris has helped 1,000s of Michigan families and businesses secure their futures in all matters of Wills, Trusts, and Estate Planning. He has taught dozens of seminars across the State of Michigan on such topics as avoiding the death tax, protecting minor children after the parents’ death, and preserving family wealth from the courts and accidental disinheritance. If you have any questions, Chris would be happy to answer them for you – just call at  248-613-0007 .

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Denha & Associates, PLLC Blog

Transferring assets into and out of a trust.

By: Randall A. Denha, J.D., LL.M.

There are many different types and forms of trusts.  That said, all trusts fall into one of two categories: revocable or irrevocable. Transferring property out of a trust can be simple or nearly impossible, depending on which kind of trust you formed.

How Revocable Trusts Work

Typically, you act as the trustee if you form a revocable trust. You retain control of the property you place into it. You can sell it or move it back out of the trust as you see fit. You can completely undo the trust if you decide the arrangement isn’t working for you after all.

But all a revocable trust can do for you is avoid probate of the property it holds when you die. You can name a successor trustee to take over management of the trust for you if you should become incompetent. This way, the court doesn’t have to appoint a conservator to oversee your personal affairs. A revocable trust doesn’t protect your property against creditors, lawsuits against you or estate taxes, because you technically retain ownership of the property held within it.

Irrevocable Trusts are Different

You cannot act as trustee when you create an irrevocable trust and place property into it, called “funding” the trust. You must step aside. You no longer own that property – your trust does – so you’re not entitled to take it back. You don’t have a voice in whether it should be sold or money from the trust should be invested or how. Only the trustee you’ve appointed can decide these things.

Once you have given an asset to the Irrevocable Trust, the asset belongs to the trust. At its most basic level, Asset Protection and Estate Planning with an Irrevocable Trust stems from this fact: if properly drafted a person can give assets to an Irrevocable Trust and his future creditors cannot take that asset. You no longer own the asset; the Trust owns the asset. This type of trust can own almost any type of asset, but before transferring any asset, a thorough discussion should be had with competent counsel.

In exchange for relinquishing all control over the property you used to fund the trust, you get several perks. Not only will it avoid probate, but neither creditors nor anyone with a judgment against you can touch it. It does not count toward the value of your estate for estate tax purposes, nor does it count toward your net worth should you need to qualify for Medicaid or other government assistance.

The following are some of the Irrevocable Trusts routinely used with a brief description of each for your Jeopardy or trivia night with friends:

  • Spousal Lifetime Access Trust (SLAT) : A SLAT is an Irrevocable Trust used typically by married couples to provide asset protection and tax planning for a spouse and descendants and which uses the gift tax exemption while allowing the spouse access to assets.
  • Irrevocable Life Insurance Trust (ILIT) :  An ILIT is an Irrevocable Trust used to remove life insurance from the Grantor’s probate and taxable estate.
  • Disclaimer Trust :  Usually used in a Will or Trust, a Disclaimer Trust refers to a protective trust for a surviving spouse funded with assets that the surviving spouse could have taken outright, but instead “disclaimed.” The Will or Trust’s terms then dictate that these disclaimed assets pour into the “Disclaimer Trust.”
  • Dynasty Trust :  A Dynasty Trust is designed to last forever, sheltering assets from generation to generation from divorce, lawsuits, and various taxes. Typically, these trusts are used by clients who wish assets to remain within and benefit only their descendants.
  • Grantor Trust :  or “Intentionally Defective Grantor Trust” is an Irrevocable Trust technique where the Grantor has given away the asset to the trust, but the Grantor still pays the income taxes due on the trust assets. This shifting of income tax burden allows the Grantor to make an additional gift to the trust each year, but the IRS views it as a penalty, not gift.
  • Grantor Retained Annuity Trust (GRAT) :  GRAT planning involves the Grantor giving assets to an Irrevocable Trust but getting back an annuity. Typically done to shift assets to descendants, the goal is to transfer assets without triggering Gift Tax recognition.
  • Qualified Domestic Trust (QDOT) :  Used when one spouse is not a US citizen. The QDOT allows the US Citizen spouse to leave assets for the non-citizen spouse’s care without triggering taxes.
  • Qualified Personal Resident Trust (QPRT) :  Parents often use a QPRT to transfer a home to descendants at a low gift tax value. The Grantor gives the home to the Irrevocable Trust but receives back the right to the home’s rent-free use.
  • Education Trusts :  Education Trust refers to an Irrevocable Trust created to distribute assets only for the beneficiaries’ education. Typically designed for the Grantor’s descendants.
  • Charitable Remainder Annuity Trust (CRAT) :  A CRAT is an Irrevocable Trust used in charitable estate planning where the Grantor gives the Irrevocable Trust an asset but receives back a fixed annuity payment.
  • Charitable Remainder Uni-Trust (CRUT) :  A CRUT is an Irrevocable Trust used in charitable estate planning where the Grantor gives the Irrevocable Trust an asset but receives back an annuity payment that is tied to the assets fair market value rather than a fixed annual amount.
  • UniTrust :  A UniTrust refers to an Irrevocable Trust that distributes assets to the beneficiary based on a percentage of the net assets in the trust on a given date. Rather than giving the beneficiary “all income” which can vary from year to year or even be zero, a UniTrust gives the beneficiary an amount every year even if there is no income.
  • Bypass Trust :  A Bypass Trust is a technique that shelters the first spouse’s estate tax exemption. Typically, the surviving spouse has access to the funds but at the surviving spouse’s death the remaining assets “bypass” that spouse’s estate and pass estate tax-free for descendants.
  • Credit Shelter Trust :  A Credit Shelter Trust is a technique where the deceased spouse’s estate and generation skipping tax exemption is “sheltered” and preserved. Typically, the surviving spouse has access to the trust funds, but at the surviving spouse’s death, the remaining assets pass to descendants free of estate and generation-skipping taxes.
  • Marital Trusts :  A Marital Trust is typically used along with a  Bypass  or  Credit Shelter Trust  to hold the portion of the deceased spouse’s assets that exceed the death tax credit. The assets are held for the surviving spouse sheltered from creditors or future spouses but are part of that spouse’s taxable estate. If drafted properly the trust qualifies as part of the “Marital” exemption, hence the name.
  • AB Trust :  An  AB Trust  or  AB Trust  is a combination of a  Credit Shelter Trust  (the “A” Trust) and a  Marital Trust  (the “B” Trust). These trusts are used by married couples to shelter all of the deceased spouse’s assets in protective trusts but keeping the tax-exempt assets separate from the assets which are not tax exempt at the first spouse’s death.
  • Pet Trust :  The trust allows you to plan for the care of your pet if you pass away. The trust also covers any pets that may be in gestation at the time of your death. By creating a trust for your pet, you are ensuring they maintain as close to a normal life as possible.

Moving Property out of a Revocable Trust

As long as you’re mentally competent, you can remove property from your revocable trust at any time. If you’re not competent, your successor trustee or power of attorney can do so. It’s simply a matter of reversing the process by which you funded the trust with the property in the first place.

For example, if you transferred real estate into your trust, you would have done so by deed, granting it from your name personally into the name of your trust. If you want to take the property back, it’s simply a matter of drafting a new deed that grants title from your trust’s name back to your name. The same process works with titles to vehicles or bank accounts. If you named the trust as beneficiary of your retirement accounts or life insurance policy, you simply fill out new beneficiary designation forms, switching things around again.

If Your Trust Is Irrevocable

None of this will work if you’ve created an irrevocable trust, or at least it won’t be that simple. If you have the express written agreement of all the trust’s beneficiaries and the trustee as well, they – not you – might be able to ask the court to intervene. If everyone is on the same page and they present a good argument for moving property out of the trust, the judge may issue an order allowing it to happen. The beneficiaries and trustee would have to establish that the original terms of the trust no longer serve the purpose you had in mind when you formed it.

The trust might then be “decanted,” effectively emptied of everything it holds. That property would then transfer to a new trust created by the trustee, one with more favorable terms. Ownership would not necessarily revert back to you.

If you included provisions for a trust protector in your original trust documents, you can call upon this third party to make the change. In most cases, that change must be something you outlined in the beginning, such as wanting to remove property at a certain time and only if specific circumstances should arise.

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How to Transfer Real Property into a Living Trust

When you re-title assets into a living trust, you are transferring ownership of those assets to the name of the trust.

A trusts is one form of legal directive that can provide protection for owners an for beneficiaries.

In estate planning, living trusts allow the Trustmaker to use and access trust assets while they are alive and well, provide for their care in the event of disability and ultimately provide lifetime protection for beneficiaries, including pets.

However, creating a trust and then transferring real property into the name of the trust can be confusing.

Preparing the deed

Before transferring any real property into the name of a trust, your attorney should prepare a new deed for your review and signature.

To ensure this transfer is accomplished properly, consult with a knowledgeable estate planning attorney .

In Florida, you may use one of the following types of deeds:

  • Warranty deed — Warranty deeds are most commonly used for real estate transactions because they warranty there are no liens against the property and that no other party has any claim to the property. Keep in mind that warranty deeds may require a title search and title insurance.
  • Quitclaim deed — Quitclaim deeds do not offer any of the protections of a warranty deed. A quitclaim deed is a simple transfer of the ownership interest of the person signing the deed.Generally, they also do not require a title search or title insurance. As such, quitclaim needs are most often used by family members and trusting friends. Quitclaim deeds are also useful for clarifying ownership of property when multiple owners exist.

Every deed requires exact information including the legal names of the current owners, the legal names of the new owner, and a legal description of the property. Florida deeds must be witnessed by two people and notarized.

The deed should then be recorded in the county office that maintains local property records.

There may be recording fees, documentary stamp taxes or gift tax reporting requirements for some transfers.

Assuming the responsibilities for new property

Individuals who transfer real estate by deed must pay a fee known as the documentary stamp tax. In all counties except Miami-Dade, the rate is $0.70 per $100 of value received for the property.

This fee must be paid to the county clerk’s office or wherever the deed was recorded.

If you are transferring property to a living trust, only minimum documentary stamp taxes are due.

However, it is always best to speak to an experienced estate planning lawyer as soon as possible.

Contact skilled Central Florida estate planning lawyers

The Law Offices of Hoyt & Bryan delivers top-tier legal guidance for wills, probate, estates, trusts, and elder law.

For more information about transferring real property in Central Florida, call (407) 977-8080 today, or contact us online to speak with an experienced estate planning attorney.

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How To Put A Home In A Trust In California? [3 Step Process]

  • Post author By Dustin MacFarlane
  • Post date December 5, 2023

How To Put A Home In A Trust In California

Securing your home for your beneficiaries through a trust is a wise decision. Specifically if you want to save the beneficiaries from the years of the probate process. Some individuals don’t go for this option because they think it’s difficult and unsafe, which is not true.

Trust isn’t only safe but a way better option than the traditional will and probate process. Not to forget, a trust doesn’t require your beneficiaries to spend a lot of money on lawyers. All in all, it’s beneficial in all aspects. 

That’s why we’ve come up with this guide, which is all about how to put a home in a trust in California . We’ll break down the entire process in  three simple steps to make sure your family gets what they should without a lot of hassle.

Can I Put My House In A Trust In California?

Yes, you can put your house or any type of property, cash, or bank account in a trust in California as long as it’s yours. Once you transfer the home to a trust, the legal ownership right will go to the “trustee” and you’ll become the “grantor.”

A trustee is a person who manages the property and passes it to the beneficiaries according to your wishes after your death. What’s beneficial about a trust is there’s no need for a long legal court process. The trustee you select will transfer the property right to the nominees.

Is Legal Assistance Necessary When Putting Your Home In A Trust?

While it’s not mandatory to hire an estate lawyer to put a home in a trust, having one can be helpful for several reasons. A lawyer can provide valuable guidance and ensure all necessary steps are taken correctly. 

For example, transferring your home to someone else is a difficult process and requires your attention to detail. You first need to understand the law of the California states, then have to fund the trust accordingly, but your lawyer can do it for you easily. 

How Do I Put My Home In A Trust? Steps To Follow 

You can read the process of how you can put the home in trust in California below. We’ve explained all the steps in detail with clear guidelines, including information on different types of trusts. 

1. Choose The Types of Trust 

Before we go further into the details of starting a trust, it’s important to understand its types. There are many types of trust, but the main ones are two: revocable and irrevocable trust. Both types are different in terms of flexibility and control for the grantor. 

  • Revocable Trust: As the name suggests, revocable trust means you, as the grantor of the trust, can cancel the allocation of the property anytime during your life. You can also modify the trust document according to your wishes. 
  • Irrevocable Trust: In an irrevocable trust, the grantor has no right to amend, even if you’re still alive. If you want to modify anything, you must ask permission from the beneficiaries who own the assets. 

2. Create A Trust 

After selecting the type, you need to create a trust. It’s best to hire an experienced lawyer for this task. Otherwise, you can create documents with a free revocable living trust builder . Just make sure to add correct information and select the trustee carefully. 

  • Trustee: Anyone can be a trustee, including your family members, friends, lawyer, or someone you trust including you. If you decide to choose yourself as a trustee, you’ll be the legal owner of the house, and after you, the trustee position will go to the successor you nominated in your life. 
  • Beneficiaries: Decide the beneficiaries of your trust. As an owner of the home, you have a right to nominate anyone within your family or friends. You can even add the name of charity organizations. 
  • Define Terms: Make sure to define terms (only if you want). For example, you can add which child gets the house and when, like if they graduate or reach a specific age like 25, 30, etc. 
  • Sign Agreement: Consider all the points we’ve discussed above, including trustees and beneficiaries and create trust with the help of a lawyer. Afterward, sign the agreement to make it valid. 

3. Change The Home Ownership 

Once you create the trust, it’s time to change the home ownership. The process of putting your home in a trust is a bit difficult because every state has laws regarding the change of real estate ownership. 

According to California law, you must prepare a deed to transfer the right to your house to the trust. This deed should include all information like your name and to whom you want to transfer. You also need to pay the transfer fee to the local municipality office. 

Later on, sign the deed in the presence of a notary so the transfer of property can be recorded legally. After all of this process, your house will be transferred to the “trust,” and the legal owner will be the “trustee” you nominated. 

We’ve explained the process of how to put a home in a trust in California in detail. It’s not a difficult process especially if you have a good lawyer on your side. A lawyer will assist you in transferring your ownership rights of home and creating a trust. 

You can contact a trust attorney from our California Probate and Trust firm. We also offer free consultation calls. Just make sure to fill out the “ request for free consultation form ” on the website, and our team will promptly reach out to assist you.

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Dustin MacFarlane’s primary focus is on Elder Law and protecting families and seniors. He is a Certified Specialist in Estate Planning, Trust, and Probate Law by the State Bar of California Board of Specialization — a rare distinction.

Prior to becoming an attorney, Mr. MacFarlane worked in the Long Term Care industry. After becoming licensed to practice law in January of 2009, Elder Law quickly became his focus. Seeing the need during his former career, Mr. MacFarlane pursued Elder Law as a primary area of practice.

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By Dustin MacFarlane

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Attorney search, search articles, find attorneys, four ways to pass your home to your children tax-free.

  • January 10th, 2024

One person handing a miniature model of a house to another person.

The best method to use will depend on your individual circumstances and needs. Here are four potential options you may want to consider:

1. Leave the House in Your Will

The simplest way to give your house to your children is to leave it to them in your will. As long as the total amount of your estate is under $13.61 million (in 2024), your estate will not pay estate taxes .

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In addition, when your children inherit property, it reduces the amount of capital gains taxes they will have to pay if they sell the property. Capital gains taxes are paid on the difference between the property's basis and its selling price. If children inherit property, the tax basis is stepped up , which means the basis would be the value of the property at the time of death, not the original cost of the property.

There are some downsides to this plan. Some states have a smaller estate tax exemption than the federal exemption, so leaving the property in your estate may cause your estate to owe the state taxes. Also, if you were to need Medicaid at any time before you died, Medicaid might put a lien on the property, and the property might need to be sold after your death in order to repay Medicaid .

2. Gift the House

When you give anyone other than your spouse property valued at more than $18,000 ($36,000 per couple) in any one year, you have to file a gift tax form. But you can gift a total of $13.61 million (in 2024) over your lifetime without incurring a gift tax. If your residence is worth less than $13.61 million and you give it to your children, you probably will not be required to pay any gift taxes. (Note that you will still have to file a gift tax form.)

The downside of gifting property is that it can have capital gains tax consequences for your children . If your children are planning to sell the home, they will likely face steep capital gains taxes. When property is gifted, it does not receive a step-up in basis, as it does when it has been inherited. When you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient.

In addition, gifting a house to your children can have consequences if you apply for Medicaid within five years of the gift. Under federal Medicaid law, if you transfer assets within five years before applying for Medicaid, you will be ineligible for Medicaid for a period of time, depending on how much the assets were worth (called a transfer penalty).

3. Sell Your Home

You can also opt to sell your house to your children. If you sell the house for less than fair market value, the difference in price between the full market value and the sale price will be considered a gift. As discussed above, you can use the $18,000 annual gift tax exclusion as well as the $13.61 million (in 2024) lifetime gift tax exemption on this gift. The same issues with gifts discussed above will apply to this gift.

Another option is to sell the house at full market value but hold a note on the property. The note should be in writing and include interest. You can then use the annual $18,000 gift tax exclusion to gift your child $18,000 each year to help make the payments on the note. This can be tricky, and you should consult with your attorney to make sure this won't cause any tax problems.

4. Put the House in a Trust

Another method of transferring property is to put it into a trust. If you put it in an irrevocable trust that names your children as beneficiaries, it will no longer be a part of your estate when you die, so your estate will not pay any estate taxes on the transfer. The house will also not be subject to Medicaid estate recovery.

The downside is that once the house is in the irrevocable trust, it can't be taken out again. Although the house can be sold, the proceeds must remain in the trust. Similar to making a gift, if you apply for Medicaid within five years of transferring the house, you may be subject to a Medicaid penalty period.

Additional Support and Resources

Figuring out the best way to pass property to your children will depend on your individual circumstances. Be sure to talk to a qualified elder law attorney in your area to decide what method will work best for your family.

To learn more about this topic, check out the following articles:

  • What Is the Difference Between a Will and a Trust?
  • 5 Things to Know to Reduce Your Tax on Capital Gains
  • Living Trust vs. Irrevocable Trust: What Is the Difference?
  • Medicaid Estate Recovery and Medicaid Payback Rules

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LIVING TRUST

How to transfer property out of trust.

By Beverly Bird, Paralegal

December 14, 2018

Reviewed by Rebecca K. McDowell, J.D.

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transfer of property in trust

  • What Is the Procedure to Cancel an Existing Living Trust?

Man signing paperwork holding property

Living trusts come in many shapes and forms, but all fall into one of two categories: They’re either revocable or irrevocable. Transferring property out of a trust can be simple or nearly impossible, depending on which kind of trust you formed.

How Revocable Trusts Work

Typically, you act as the trustee if you form a revocable trust. You retain control of the property you place into it. You can sell it or move it back out of the trust as you see fit. You can completely undo the trust if you decide the arrangement isn’t working for you after all.

But all a revocable trust can do for you is avoid probate of the property it holds when you die. You can name a successor trustee to take over management of the trust for you if you should become incompetent. This way, the court doesn’t have to appoint a conservator to oversee your personal affairs. A revocable trust doesn’t protect your property against creditors, lawsuits against you or estate taxes, because you technically retain ownership of the property held within it.

Irrevocable Trusts are Different

You cannot act as trustee when you create an irrevocable trust and place property into it, called “funding” the trust. You must step aside. You no longer own that property – your trust does – so you’re not entitled to take it back. You don’t have a voice in whether it should be sold or money from the trust should be invested or how. Only the trustee you’ve appointed can decide these things.

In exchange for relinquishing all control over the property you used to fund the trust, you get several perks. Not only will it avoid probate, but neither creditors nor anyone with a judgment against you can touch it. It does not count toward the value of your estate for estate tax purposes, nor does it count toward your net worth should you need to qualify for Medicaid or other government assistance.

Moving Property out of a Revocable Trust

As long as you’re mentally competent, you can remove property from your revocable trust at any time. If you’re not competent, your successor trustee can do so. It’s simply a matter of reversing the process by which you funded the trust with the property in the first place.

For example, if you transferred real estate into your trust, you would have done so by deed, granting it from your name personally into the name of your trust. If you want to take the property back, it’s simply a matter of drafting a new deed that grants title from your trust’s name back to your name. The same process works with titles to vehicles or bank accounts. If you named the trust as beneficiary of your retirement accounts or life insurance policy, you simply fill out new beneficiary designation forms, switching things around again. Read More: Can an Heir Sell Property When the Title Is in a Revocable Living Trust?

If Your Trust Is Irrevocable

None of this will work if you’ve created an irrevocable trust, or at least it won’t be that simple. If you have the express written agreement of all the trust’s beneficiaries and the trustee as well, they – not you – might be able to ask the court to intervene. If everyone is on the same page and they present a good argument for moving property out of the trust, the judge may issue an order allowing it to happen. The beneficiaries and trustee would have to establish that the original terms of the trust no longer serve the purpose you had in mind when you formed it.

The trust might then be “decanted,” effectively emptied of everything it holds. That property would then transfer to a new trust created by the trustee, one with more favorable terms. Ownership would not necessarily revert back to you.

If you included provisions for a trust protector in your original trust documents, you can call upon this third party to make the change. In most cases, that change must be something you outlined in the beginning, such as wanting to remove property at a certain time and only if specific circumstances should arise.

You can transfer property in and out of a revocable trust simply by changing the title, as you're entitled to do so. However, if your trust is irrevocable, you don't have the power to remove property from the trust.

  • Antonelli & Antonelli: Revocable vs. Irrevocable Trusts – What’s the Difference?
  • Wealth Management: Five Ways to Modify an Irrevocable Trust

Beverly Bird is a practicing paralegal who has been writing professionally on legal subjects for over 30 years. She specializes in family law and estate law and has mediated family custody issues.

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The Moneyist

‘i gave up a job that i loved passionately’: my husband secretly set up a trust that includes our home and his investments. what should i do, quentin fottrell, ‘instead of having a high-level job with bonuses and accolades, i ran one of his companies with no pay’, “our portfolio is worth 10 times what it was when we married.” (photo posed by a model.).

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Dear Quentin,

My husband and I married 10 years ago. It was a second marriage for both of us. I recently found out that after five years of marriage, he put all of our assets into trusts controlled by him alone. At that time, at his request, I also gave up a job that I loved passionately so we could establish a stable home for his youngest daughter. He also has three other children who had already launched. 

Instead of having a high-level job with bonuses and accolades, I ran one of his companies with no pay. I also drove his daughter’s carpool, allowed his adult son and his son’s children to move in with us, and ran our home in a smooth and efficient manner. I acted as a good steward of his assets so he could maximize his retirement and investments. I also added substantial assets to our portfolio with my “hobby” of real-estate investing.

I’m a team player and thought that upon retirement we would live the life we dreamed about during the early days of our marriage — I expected he would retire at 65 and we would travel the world. Our portfolio is worth 10 times what it was when we married. His retirement account and several IRAs were opened after we were married. 

Irrevocable trust for his children

He put everything, even our home and my investment properties, into a trust, with his friend as trustee. I had been the beneficiary of his retirement account, but now the trust is. I believe this change of beneficiary was forged. He invested in a company that stands to make a lot of money, and that investment was put into an irrevocable trust for his children only. His children have quit their jobs to create startups with funding from their dad. At 69, he feels he can’t retire because he’s helping his kids. 

I told him that if I outlived him, I would give everything I inherited from him to his children, and my assets would go to my family. When confronted about the trusts, he said he assumed I’d be OK with that because of my promise to give his assets to his kids. I’m not even a 50% beneficiary. I’m terrified his kids will boot me out of my home or declare me incompetent when I’m a little old lady just trying to sit on the beach. I don’t even have kids of my own to look out for me.   

He can’t understand why I’m upset. Now I’m nearing retirement age with no extra investments in my retirement account, no credit for the work I’ve done and no say in my assets. I don’t even have a work history for the past 10 years and can’t get a job. Is this even legal? If I bring an attorney in, it will ruin the marriage. I can’t even contest the will because it states if anyone contests the will, they will have nothing. 

With most things, I’m smart. But gosh, I’ve been so stupid. What are my options? 

Second-Class Wife

“Transparency is key to marital estate planning.”

Dear ex-wife,.

Secret trusts and a possible forgery do not constitute a healthy marriage.

There’s nothing stopping a spouse from setting up a trust during a marriage, but they should do so with separate assets. To set up a trust with separate assets without telling your spouse is bad manners, but to create a trust with both separate and marital assets, in secret, is a recipe for a legal battle and divorce court. Marital assets are those that are accumulated during the marriage.

Sometimes in life, you have to make a choice: You can stand back and allow your husband to squirrel away marital property and thereby “save” your marriage on paper — even though he has broken your faith in him and in the marriage. Or you can call a lawyer and perhaps a forensic accountant to examine the contents of the trust and trace their origins, and thereby risk your marriage.

“While there are legitimate reasons for a spouse to set up a trust during marriage, sometimes it is done in order to improperly shield assets from equitable distribution,” according to Jewell Law PLLC in New York. “Often, the non-beneficiary spouse is not aware of the trust or thinks the money came from another source such as a family member.”

Transparency is key to marital estate planning. “A trust set up in one spouse’s name can be considered separate property regardless of whether it is set up before or after marriage,” the law firm adds. “However, when it is created during a marriage, the non-beneficiary spouse must raise the question of whether any marital assets have been put into the trust.”

“This is a situation in which a prenuptial agreement could have been helpful to confirm — and protect — the rights of each spouse in the event of divorce or death,” says Neil V. Carbone, a partner at Farrell Fritz, P.C. ”State law governs a spouse’s inheritance rights. Most states provide a surviving spouse with a minimum ‘elective’ share, that is, the right to take a share of a deceased spouse’s property regardless of what a will or revocable lifetime trust agreement provides.”

“The idea of the elective share is to avoid the complete disinheritance of a surviving spouse, so ‘no contest’ clauses are ineffective to defeat the demand for an elective share,” he adds.  “What goes into the elective share ‘pot’ will vary from state to state. For example, in New York, life insurance is not included in determining the elective share. Some people may seek to defeat a spouse’s elective share rights by transferring property to an irrevocable trust, but they generally must survive a look-back period in order for the transferred property to be excluded.”

Potential forgery

Some retirement plans require a spouse to be the primary beneficiary. If your husband changed the beneficiary on a qualified retirement plan without your consent this should be challenged. Other retirement plans, such as IRAs, do not carry the same spousal-consent requirements. You can read more about what plans are covered under the Retirement Equity Act here .

Many people are surprised to learn that 401(k)s and IRAs are treated differently,” Carbone says. The former are governed by the Employee Retirement Income Security Act of 1974 and, typically, a spouse must consent in writing to have someone else named as beneficiary, he adds. “IRAs are not governed by ERISA and the spouse’s consent is not required to designate a non-spouse as a beneficiary.” If your husband did forge your consent on a 401(k) beneficiary designation form, you should act ASAP.

While you process that information, I have other questions for you to mull over: What are you hanging onto? The illusion of a happy marriage? The promise of financial security, even though that seems increasingly unlikely? The damage to your marriage has already been done by your husband. By hiring a lawyer after so many years of acquiescing to his requests, you would be merely cleaning up the fallout from his actions.

One final piece of advice: If you are considering divorce, you would be better off waiting until your 10th wedding anniversary. After that date, you will be able to receive spousal Social Security benefits. If he earned more than you during your marriage, you are entitled to a maximum of 50% of your husband’s full retirement benefit.

You’ve given up a lot for your husband. Yes, you did it willingly, but you contributed your time and financial expertise to your husband’s businesses, and any right-thinking divorce court would not be likely to look kindly on your husband’s actions. Not all stepmothers abide by their promise to distribute assets to their late spouse’s children, but this is not an excuse for his actions. 

In addition to forgery and financial skullduggery, you can add gaslighting to the list of his misdeeds.

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as  Twitter.  

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

I have $1.5 million in stocks and bonds. I asked my broker to convert my bonds to cash. He didn’t and my portfolio fell by $100,000. Can I sue?

‘She was very special to me’: My late 98-year-old cousin was targeted by grifters. They stole $800,000. Do I have any recourse?

‘It was a mistake’: My father set up a revocable trust, leaving everything to my stepmother. She’s cutting me out completely. What can I do?

Check out  the Moneyist private Facebook  group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

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About the Author

transfer of property in trust

Quentin Fottrell is MarketWatch's Managing Editor-Advice Columns and The Moneyist columnist. You can follow him on Twitter @quantanamo.

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  1. TRUST: In Property & Assets

COMMENTS

  1. Putting a House in Trust: Why, How, Pros and Cons

    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...

  2. How to Transfer Property into a Trust

    Transferring Real Property into a Trust , including a person's personal home and any real estate investments, calls for a different set of steps. Essentially, a new deed has to be created that names the trust as the owner of the property. The new deed also must be recorded at the courthouse. The transfer can be accomplished with two types of deeds.

  3. Transferring Personal Property into a Trust

    Commonly, Tangible Personal Property that is transferred in a Trust will include material possessions like: Jewelry Art Collectibles Furniture Appliances Electronics Clothing Animals and Livestock

  4. How To Transfer Real Estate Property Into a Trust

    1. Find the original property deed 2. Get a new deed 3. Notarize the form A trust is a separate entity that can hold assets on your behalf, and an inter vivos trust, created while you're alive, can be a useful way to have control and flexibility over your assets.

  5. How to Transfer Real Estate Out of a Trust

    When it's time for a beneficiary to take ownership of a home held by the trust, the trustee will transfer ownership by using a deed. The trustee will need to sign the deed and record it with the local county department that keeps land records. What Kind of Deed Will You Need to Transfer Real Estate?

  6. How to Transfer Property Out of a Trust After Death

    Transferring property out of a trust is the trustee's job. Generally, after the trustor passes away, the trustee notifies the trust's beneficiaries, enacts the trust's conditions and the beneficiaries receive the assets. In addition, the grantor's death makes the trust irrevocable.

  7. A DIY guide to transferring assets into a living trust

    Need to transfer assets to a living trust? This guide provides detailed, practical steps to re-title your assets and secure your estate's future: Learn exactly how to transfer assets to a living trust, avoiding any unnecessary confusion or legalese. Key takeaways of a living trust

  8. How To Put Your Home In A Trust

    "You transfer your home to the trust by signing a deed that names the trustee as the new owner of the property. The deed then needs to be recorded with the local county recording office. Once...

  9. How to Put Your Home in a Trust

    In other words, a property trust makes the transfer of your home to someone else legal. And this process makes it far more likely that the outcome you want will happen than only going by verbal consent. When you create a property trust, it can either be a revocable or an irrevocable trust. There are benefits to either.

  10. How to Transfer Property into a Trust

    Real estate can be transferred into a trust by a deed that transfers title from the grantor to the name of the trust. Under California law, a Preliminary Change of Ownership Report must be filed simultaneously with the deed at the county recorder's office in the county where the real property is situated. This lets the county assessor's ...

  11. Putting Your House Into A Trust

    The main benefit of putting your house in a trust is to bypass probate when you pass away. All your other assets, regardless of whether you have a will, will go through the probate process. Probate in real estate is the judicial process that your property goes through when you die. During this process, your assets will pay any debts or taxes ...

  12. How Do I Put Property, Money, and Other Assets in a Living Trust

    Trust assets can transfer to beneficiaries on death or at a specified time. A trust has several other benefits as well, including the following: After death, a trust can reduce or eliminate state and federal estate taxes.

  13. Transfer Property Into a Trust

    How to Transfer Real Estate Into a Trust. First, you'll need to prepare and sign a new deed for the property. You'll usually need a grant form or quit claim form to transfer the deed. The forms vary by state and there are some nuances to the process. Work with a lawyer experienced in each state where you own property to ensure that the ...

  14. How to Transfer Property Held in a Trust

    How to Transfer Property Held in a Trust By Maggie Lourdes, J.D. ••• Many people transfer real estate, vehicles, investments and personal belongings into trusts as part of their estate planning. Assets held in trust bypass probate when you die so they are transferred to heirs free of court costs and delays.

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    Putting A House Into A Trust - Why Do People Do It? There are two main reasons why people put a house into a trust. 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.

  16. Transferring Assets Into And Out Of A Trust

    That property would then transfer to a new trust created by the trustee, one with more favorable terms. Ownership would not necessarily revert back to you. If you included provisions for a trust protector in your original trust documents, you can call upon this third party to make the change. In most cases, that change must be something you ...

  17. Tax Implications Of Transferring Property Into A Trust

    What are the tax implications of transferring property into a trust? In this article, you'll learn about: the tax implications of transferring property into a trust tax implications of selling a house in a trust (before and after death) how trusts are taxed who pays taxes on property in a trust how trust distributions are taxed

  18. Transfer of Real Estate After Death

    If the property was owned in the deceased person's name alone (and there is no living trust or transfer-on-death deed, as discussed above), the property will probably have to go through the probate process to be transferred to whomever inherits it. Who inherits the property is determined by the person's will, and if there is no will, by state law.

  19. How to Transfer Real Property into a Living Trust

    Contact skilled Central Florida estate planning lawyers. The Law Offices of Hoyt & Bryan delivers top-tier legal guidance for wills, probate, estates, trusts, and elder law. For more information about transferring real property in Central Florida, call (407) 977-8080 today, or contact us online to speak with an experienced estate planning ...

  20. How To Put A Home In A Trust In California? [3 Step Process]

    Yes, you can put your house or any type of property, cash, or bank account in a trust in California as long as it's yours. Once you transfer the home to a trust, the legal ownership right will go to the "trustee" and you'll become the "grantor.". A trustee is a person who manages the property and passes it to the beneficiaries ...

  21. Four Ways to Pass Your Home to Your Children Tax-Free

    4. Put the House in a Trust. Another method of transferring property is to put it into a trust. If you put it in an irrevocable trust that names your children as beneficiaries, it will no longer be a part of your estate when you die, so your estate will not pay any estate taxes on the transfer.

  22. Tax Implications of Transferring Property into a Trust

    A trust is a legal entity created to hold assets on behalf of beneficiaries. It provides a way to manage and distribute assets, offering various benefits. However, it is essential also to consider the tax aspects of trusts, including transfer tax, income tax, and property tax implications. Trust Income Taxation

  23. How to Transfer Property Out of Trust

    The beneficiaries and trustee would have to establish that the original terms of the trust no longer serve the purpose you had in mind when you formed it. The trust might then be "decanted," effectively emptied of everything it holds. That property would then transfer to a new trust created by the trustee, one with more favorable terms.

  24. Trust vs. Will: Do Americans Really Know the Difference?

    A Trust can be used to transfer property that you own to any recipient (Beneficiary) of your choice, and they do not necessarily have to be family members. Further, these family members do not necessarily manage the Trust or its assets. The person creating the Trust (the Trustor) is responsible for selecting a Trustee, or a third party who is ...

  25. Solving Generation-Skipping Transfer Tax Problems: Five Practical

    For example, in 2012, a taxpayer funded a trust for her child. The trust agreement states that the assets will be distributed outright to that child when the child reaches age 40. When the original transfer was made, of course, the transferor did not expect that the trust would benefit skip persons or be subject to GSTT.

  26. My husband secretly set up a trust that includes our home. What should

    Secret trusts and a possible forgery do not constitute a healthy marriage. There's nothing stopping a spouse from setting up a trust during a marriage, but they should do so with separate assets ...

  27. How to Avoid Estate Taxes With Trusts

    The estate tax is a transfer tax like income or capital gains taxes. It triggers when someone receives wealth or assets that they didn't have before. In this case, the estate tax triggers when someone receives assets from a deceased benefactor. The estate tax only applies to estates worth more than the IRS' cap, and the IRS adjusts this cap ...

  28. Federal Register :: Anti-Money Laundering Regulations for Residential

    The transfer of residential real property to a trust by the settlor or grantor may therefore be reportable, although FinCEN expects that such reporting will be significantly limited by the exception for transfers of financed residential real property and by the exception for transfers occurring as a result of death.