Pros and Cons of Putting Your Home in a Trust

While it might seem like putting your home in a trust would be nothing but advantageous, that may not necessarily be the case. Due to your unique financial situation and goals, it’s important that you understand the pros and cons of this decision.

Pro: Avoiding the Probate Process

Again, trusts are designed to avoid probate and the burdensome costs that often go along with it. While it’s true that some states have come a long way in terms of streamlining those kinds of costs, avoiding probate remains one of the main priorities for people pursuing a living trust. Homeowners who are interested in putting their house in trusts want to make sure their heirs can take over ownership of the home with as little time and money spent on the process as possible.

Similarly, a trust can be used to transfer other properties, too, even if they’re located in other states. By using a trust for those other properties, you’ll avoid probate costs for them, as well.

Pro: Defending Against Future Health Problems

No one likes thinking about a time when they may be unable to manage their own affairs because of illness, but it’s an important topic to confront as we get older. After all, while not common, that sort of thing certainly does happen.

Putting your home in a trust is an effective way to protect against something like a stroke getting in the way of how the property is managed and, eventually, transferred.

Instead, a new trustee will be able to fulfill the provisions of your trust, including what you intended for your house and any other properties.

Make your spouse your co-trustee, and this becomes even easier. They can remain as your trustee while also managing your home (or homes) because it’s protected by the trust.

Pro: Possible Reduction of Estate Taxes

Putting your home in a trust won’t actually grant you any sort of favorable tax advantage. That’s a common misconception. As a living trust is revocable, it can also be modified or even dissolved altogether, which would make it a formidable weapon against proper tax collection if the IRS offered special terms to grantors.

However, you might be able to reduce your estate-tax obligation if your estate is designed with this purpose in mind. This is why you should take some time to work with an experienced estate planner. Put things in order first, and then put your home in a trust to save on taxes.

Con: Complexity and Resulting Costs

With all that being said, many homeowners look at the costs and complexity involved with designing a trust and decide it would make much more sense to opt for a simple will.

Furthermore, things can get even more complicated as time goes on. If you think you’ll be buying or selling properties in the future, you’ll need to be very diligent about how you move them in and out of your trust.

Of course, those kinds of transfers will come with more costs, as well, which is one more reason many owners decide they’ll use a will instead.

How Does it Work to Put a Home in a Trust

To transfer property to a trust, you’ll need the assistance of an estate planning attorney or a law firm specializing in trusts and estates. They can help you set up either a revocable living trust or an irrevocable trust, depending on your financial goals and needs. The attorney will draft a trust agreement that outlines the terms and conditions, as well as designating a successor trustee to manage the trust after the grantor’s death.

Once the trust is established, the property’s title is transferred to the trust, and the trust becomes the legal owner. Other assets, such as bank accounts and investments, can also be placed in the trust for streamlined estate management.

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