If you are like many California residents, your home is one of your most valuable assets, and ensuring it is taken care of into your old age and passed to your loved ones efficiently is of the utmost importance. Many people like you come to our office with a single question: Why would you put your house in a trust? Putting your house in a trust offers several advantages, including:
- Avoiding probate
- Protecting assets
- Planning for incapacity and senior care
- Tax advantages
- Flexibility and control
Here is what you need to know about how you could benefit from putting a house in a trust, as well as the process for putting a house in a trust.
Why Would You Put Your House in a Trust?
Putting your house in a trust could be a great option for you, but it’s crucial to understand the details of each benefit listed above so you can determine if this is the right estate planning strategy for your situation. Here’s what to know so you can make an informed decision.
Related Article: What Are the Best Assets to Put in a Trust?
Avoiding Probate
Avoiding probate is one of the most common answers to the question, Why would you put your house in a trust? This benefit is enormous for a few reasons. Probate can be a time-consuming and expensive legal process that restricts access to this asset until the estate is settled.
Probate can get more complicated when facing a multistate probate process. For example, if you live in California but have a vacation home in Florida, your Florida property will go through the Florida probate process, while the rest of your assets go through the California probate process.
As a result, probate can significantly slow down your beneficiaries’ ability to inherit or sell the property. Putting your house in a trust allows for a quicker and more efficient transfer of ownership to your beneficiaries.
Probate is also a public process, while trust proceedings and transfers are private, keeping your financial affairs confidential. This privacy could help avoid disputes, which can also be costly and time-consuming in their own right.
Related Article: How to Avoid Probate with Living Trusts
Protecting Assets
In some cases, a trust can protect your assets from creditors, lawsuits, and other financial claims. If you’re concerned about a potential future divorce, a trust can also help safeguard your assets during legal proceedings in this situation.
Further, a trust can be a great way to reduce the value of your estate, allowing you to qualify for Medicaid assistance if you need it. Not all types of trusts will accomplish this outcome, so if this is one of your concerns, talk with an estate planning professional.
Related Article: Can A Trust Protect Assets from Lawsuits?
Planning for Incapacity & Senior Care
Estate planning and elderly financial care are other crucial considerations for those wondering, Why would you put your house in a trust? If you become incapacitated, a trust allows you to designate a trustee to manage your assets, ensuring continuity and avoiding conservatorship proceedings.
A trust can be integral to your estate plan and help you guarantee that your assets are managed and your loved ones are taken care of per your wishes. Transferring your home into a trust can also be a great way to relieve some of the burden ownership puts on you in old age.
For example, if you put your home in a trust, you can have a trustee pay the bills and taxes using trust assets. This is an advantage because fulfilling these financial responsibilities can become increasingly more difficult with old age.
Related Article: Maximizing Wealth Transfer: The Power of Trusts and Fiduciary Services
Tax Advantages
Several tax advantages exist for beneficiaries and the person putting the home in the trust. In some situations, older people want to give their property to their children while they are still alive so they can enjoy their retirement.
In theory, this makes some sense. Your children may have a growing family and need more space, and your home may now be too big for you. On top of that, owning a home also comes with more responsibilities and costs than you want to deal with at this stage in your life.
If you choose to gift your property without a trust, your children will likely not receive a step up in basis, which means that if they choose to sell it, there could potentially be a large capital gains tax, not to mention the need to file a gift tax return.
However, if you place your property in a trust, your children can still enjoy a larger home, and you can enjoy your golden years stress-free. You will not have to transfer the property deed until your death, at which point your children will receive a step up in basis and could avoid a huge tax bill.
Depending on your specific circumstances and jurisdiction, placing your home in a trust may offer additional tax benefits that are crucial to consider. Ultimately, the only way to understand these benefits is by talking with an attorney and CPA who specialize in this niche.
Flexibility and Control
Flexibility and control are some of the final advantages to consider if you are wondering, Why would you put your house in a trust? You can tailor the terms of your trust to your specific needs and wishes, ensuring your assets are distributed according to your desires.
You can specify how and when your beneficiaries receive their inheritance, providing flexibility and peace of mind. As long as you are still living and have a revocable trust, you can add or remove assets from the trust as long as you are in control of it.
If you want to sell your home to buy another and place it in the trust, this is possible. Alternatively, you can also place a newly acquired property in the trust. If you wish to, you can also dissolve the trust altogether. You will have options and control throughout this process!
It’s important to note that a revocable trust becomes irrevocable when you die, so the terms cannot be changed by anyone after your death, meaning your final wishes must be honored. A will is much less flexible and more complicated to change.
Just as importantly, you can put multiple properties in the same trust. This means if you own more than one home or other real estate, you do not need to create a separate trust for each property. The same trustee can handle all the properties.
How Do I Put My House in a Trust?
Here’s how to put your house in a trust:
- Decide what type of trust you’d like to have. This choice often boils down to whether you want to create a revocable or irrevocable trust.
- Choose your trustee and beneficiaries. Choose a trustworthy person who has experience in this niche to be the trustee. A professional trustee is often the best choice as they will understand how to navigate the tax implications of establishing a trust, ensure the beneficiaries’ and trust’s best interests are always prioritized, and act with integrity by upholding their fiduciary duty. You also want to ensure you choose beneficiaries.
- Create the trust document. Work with an attorney to create a well-crafted trust document tailored to your needs and wishes and ensure it is legally binding. Creating a legally binding trust document requires getting the necessary signatures and notarizations.
- Get copies of the trust document. Give your trustee and estate planning attorney a copy of the most up-to-date version of the trust, and ensure you keep a copy in a safe place. Giving a copy to relevant parties, such as a spouse or your children, could be prudent as well.
- Fund the trust. You’ll need to transfer ownership of your home to the trust by creating a new deed for your property that gives full ownership to the trust. This step will likely require filing the new deed with your local county recorder’s office to officially transfer ownership.
Related Article: How to Set Up a Living Trust in California
Now You Know the Answer to the Question: Why Would You Put Your House in a Trust? Work with a Professional Today.
Putting your house in a trust ensures you avoid probate, can help protect your assets, facilitates estate planning and senior care, offers tax advantages, and provides you with flexibility and control over your assets. If you feel like you could benefit from these advantages, working with a professional is of the utmost importance.
More specifically, we advise working with an estate planning attorney to set up the trust and with a professional trustee to manage the trust effectively.
