Securing your beneficiaries by putting your house in a trust is a wise decision. Whether you are leaving it behind for your children or other loved ones, a trust enables you to provide them with a secure financial future without having to endure the time-consuming and stressful probate process. In some situations, you may even want to put your home in a trust to maintain eligibility for benefits like Medicaid. Regardless of your motivation, a trust is a far better legal tool than the traditional probate and will process. Still, to use this estate planning strategy, it’s essential to know how to put your house in a trust, which is easier said than done. But fear not!
We are here to break down this complicated process so that you and your loved ones can enjoy the peace of mind of knowing that your home is safe and sound in the security of a trust. So let’s get into it.
Can I Put My House in a Trust?
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 will become the grantor.
A “trustee” is a person who manages the property and passes it to your beneficiaries according to your wishes after your death without the need for a long legal process like probate.
This individual is named in your trust document and can, generally, be anyone over the age of 18, though the specialized skills needed for this role make hiring a professional trustee advisable.
Related Article: Why Would You Put Your House in a Trust in California?
How to Put Your House in a Trust
Putting your house in a trust is an essential part of estate planning that ensures your property is transferred smoothly to your beneficiaries, so it’s important to understand this process. There are 3 basic steps for how to put a house in a trust:
- Choose the Type of Trust
- Create the Trust
- Transfer Home Ownership
1. Choose the Type of Trust
The first step for those wondering how to put a house in a trust in California is to choose the type of trust. There are several types of trusts, but they can be broadly divided into two categories: revocable and irrevocable.
Both types of trusts are different in terms of flexibility and control you will have after creating them, so it’s crucial to understand the differences. Here’s what to know about both so that you can ensure you make an informed decision.
Related Article: What Are the Different Types of Trusts?
What is the Best Trust to Put Your House In?
Ultimately, the best trust to put your house in depends on your goals. Here is when an irrevocable or revocable trust makes sense for you:
- An irrevocable trust offers your assets the most protection from creditors and lawsuits while streamlining the probate process, reducing estate taxes, and enabling you to qualify for benefits like Medicaid. However, once established, an irrevocable trust cannot be easily modified or changed.
- A revocable trust, also called a living trust, enables you to maintain control over the house while still avoiding probate. You can modify the document at any time during your life when a trust is revocable. This type of trust is also easier to set up and allows for tax-free property transfers to beneficiaries. Because you can modify this type of trust, anticipate revisiting it more regularly to update it. Just remember this could result in added fees. However, a revocable trust does not protect assets from creditors and lawsuits or reduce estate taxes.
There is much more to know about both types of trusts. For example, a revocable trust automatically becomes irrevocable upon your death. Working with a lawyer to set up your trust ensures you are making the right choice for your goals.
Still, the process is largely the same whether you are interested in learning how to put your house in a living trust or irrevocable trust.
“A big part of this initial stage should revolve around what you are trying to achieve,” said Marcia L. Campbell, a professional trustee and trust accountant with decades of experience helping clients successfully navigate the complexities of this process and manage their trusts after they have been created. “Be sure to set aside some time for some goal setting when making this decision,” she said.
Related Article: Does a Living Trust Go Through Probate?
2. Create a Trust
After selecting the right type of trust for you, creating the trust is the next part of the process. This stage, in particular, is when you need an experienced lawyer. A lawyer will guide you through:
- Choosing a trustee: Anyone can be a trustee, including family members, friends, business associates, or even you. If you elect to choose yourself as the trustee, you will be the legal owner of the house, and after you pass away, the house will transfer to the successor trustee you name.
- Choosing beneficiaries: You also need to decide who the beneficiaries of your trust will be. These will be the people who will receive assets, such as money or your home. You have a right to nominate anyone – you can even include charity organizations in your trust if you wish.
- Defining and writing terms: Make sure that you define terms that align with your specific goals. A lawyer is key because they will ensure that the language in the trust document is legally binding. For example, maybe you want a child to meet specific requirements to receive the house, like reaching a certain age, graduating from university, or getting married.
- Signing the agreement: After working with your attorney to write the trust document and revising it sufficiently to ensure it is legally binding and reflects your goals, make sure it has the necessary signatures and notarizations. After you have signed it, you have created your trust.
- Getting copies: Lastly, you want to create copies of the trust document. Make one for yourself, one for your attorney, and one for the trustee. Make sure you store them in a safe place, like a safe or firebox. Some people choose to give copies to their children for the sake of transparency to minimize the likelihood of surprises and, as a result, disputes down the road. This depends on you.
“It’s not unusual for these documents to go through several drafts as you outline and solidify the details of the terms, beneficiaries, and other components,” said Campbell. “If you have a revocable trust, the drafting process can last a lifetime if you want to revisit it regularly. What’s important is that you and your attorneys take as much time as necessary to draft the trust according to your goals,” she said.
Related Article: How to Set Up a Living Trust in California
3. Change the Home Ownership
Once you have created the trust, it’s time to fund the trust and transfer home ownership. In California, you must prepare a deed to transfer your house to the trust.
This deed should include all information, such as your name and to whom you want to transfer. You will also need to pay the transfer fee to your local municipality office. Keep in mind that each county is different, and in some cases, you may need to pay the fee to your local recorder’s office, for example.
Then, sign the deed in the presence of a notary and take it to the recorder’s office for filing, so the transfer is legally recorded. After this last stage of the process, you will have transferred the house to the trust, and the trustee you nominated will become the legal owner.
Related Article: What Are the Best Assets to Put in a Trust?
How Much Does it Cost to Put Your House in a Trust?
The cost of putting your house in a trust can vary widely depending on several factors, but many of these hinge on whether you are trying to determine how to put a house in a living trust or an irrevocable trust:
- Putting your house in a revocable trust generally costs between $2,500 and $5,000 with a basic setup, though this cost can increase if you have multiple properties, complex financial situations, or if you need additional documents to complete the process, like powers of attorney. Attorney fees should also factor in, and they can charge hourly or a flat fee for the entire process, and they will need to review the trust regularly to account for major life changes.
- Putting your house in an irrevocable trust is usually a little more expensive. The reason is that these trusts are more complex. Attorney fees will also factor in.
Additional costs could also include recording fees that can depend on your local offices and ongoing maintenance, such as trust management expenses and annual reporting and trust accounting. These expenses depend on the size and complexity of the trust.
Can I Put My House in a Trust Without a Lawyer?
It is not mandatory to hire an estate lawyer to put your house in a trust, but having one is essential to ensure that your trust is legally viable and structured to accomplish your goals. A lawyer provides valuable guidance to ensure you take all necessary steps.
Just as importantly, working with a lawyer can save you money in the long run by avoiding costly mistakes or even disputes over the property.
How Long Does it Take to Put a House in a Trust?
How long it takes to put a house in a trust depends entirely on your circumstances. If you already have a trust set up and it is revocable, it could take as little as a few weeks to make arrangements to put a house in it.
However, if you are starting from scratch, this process can take anywhere from a few weeks to several months or even longer. With professional guidance, you can streamline this process and gain a better understanding of the timeline to expect.
“Your house is your biggest property and investment, and taking the time to properly put your house in a trust is an investment in your peace of mind and your family’s future,” said Campbell. “Don’t rush the process. Whether it takes weeks or months, getting this right today will save you from complications down the road,” she said.
What is the Best Way to Leave a House to Your Children?
The best way to leave a house to your children involves careful estate planning that ensures a smooth and efficient process and aligns with your goals.
Generally, setting up and using a trust is the best option because it streamlines the process of transferring property to your children, protects the house from creditors and lawsuits, and minimizes the tax burden on your children.
Related Article: Maximizing Wealth Transfer: The Power of Trusts and Financial Services
Now You Know How to Put Your House in a Trust. You Should Always Work with a Professional!
Putting your house in a trust could be a smart move for securing your property and providing for those you love the most, even when you are no longer around to do so. Whether you are trying to avoid the lengthy probate process, save on taxes, or protect assets from creditors, understanding how to put your house in a trust in California can offer you peace of mind and ensure your wishes are honored.
While the process may take time, working with a professional will help you navigate the complexities and ensure everything is set up properly. Taking the necessary steps now can save you and your family from future complications.
