A home is a significant asset, and for many, the most valuable asset they will ever own. Of course, a home is much more than just a piece of property, whatever its financial worth; it’s where you live, raise your family, and make memories. In short, your home is something you want to protect. Putting your house in a trust is an effective way to do just that.
A trust is an increasingly popular estate planning tool. Many people think that trusts are only for the wealthy, and it is true that people with significant wealth usually have trusts, because they can be an excellent way to manage and protect assets. However, a trust also has value for people who don’t consider themselves wealthy.
Think of a trust as a vessel built to hold property. A grantor (also called a settlor or trustmaker) creates the trust and funds it with property. A trustee manages the assets in the trust, for the benefit of one or more beneficiaries.
With a revocable or living trust, you can create the trust as well as manage the assets in it during your lifetime for your own benefit. You can continue to use, enjoy, and transfer trust property (including a house) just as if it were in your own name rather than the name of the trust.
All of that leads to a natural question: if you can do all the same things with the property in your trust as you can when it’s in your own name, why create and fund a trust in the first place?
There are several reasons you might want to consider putting your house in a trust. A trust offers several advantages, including:
One of the most common reasons that people incorporate a trust in their estate plan is to prevent assets from having to go through the probate process. While different types of trusts offer different benefits, property held in any type of trust bypasses probate. Property left in a will, by contrast, must go through probate.
Probate can be time-consuming and costly. If you have a trust, the trustee can continue to administer the trust for your beneficiaries’ benefit after your death. If you were the trustee and/or beneficiary during your lifetime, the successor trustee named in the trust document will take over after your death, managing the property for the benefit of your named beneficiaries. This process is seamless and, unlike probate, requires no court involvement.
Unfortunately, your death may not be the only reason you can no longer manage your assets. What if you develop dementia or suffer a serious illness, accident or injury that renders you legally incapacitated? If your house and other property are in a trust, your successor trustee can instantly step in and manage them on your behalf. The trustee can pay the mortgage, ensure that taxes and bills are paid, and otherwise prepare the property.
Without a trust or other planning measures in place, your family would likely have to pursue a guardianship or conservatorship to have the authority to manage your affairs. That can be time-consuming and stressful—especially at a time when they may already be stretched thin by the need to deal with your health issues.
Putting your house in a trust allows you flexibility and control that other means of transfer do not. You can maintain full control of the property during your lifetime as long as you have legal capacity. Your intended beneficiaries have no legal right to the property, and you can even change future beneficiaries during your lifetime if you wish.
If your intended beneficiaries are minors, putting your house in a trust means that the successor trustee you have chosen can manage the property for them if you should die before they reach legal adulthood. Otherwise, a conservator would need to be appointed to do so.
If you are concerned about your intended beneficiaries’ ability to manage their inheritance, including a house, putting your house in a trust can help to protect them. If permitted by the trust document, the trustee can manage the property until your beneficiaries are able to do so.
If you are concerned about your beneficiaries’ creditors gaining access to their property, you can also choose a type of trust that offers protection for assets from divorcing spouses and other creditors.
You may not realize that probate records are public, meaning that anyone who wishes can access them to learn about the distribution of your estate. Trusts, by contrast, are private. No one who is not involved with the trust has any right to learn about its terms.
Putting your house into a trust isn’t terribly complicated, but it is important to be sure that it is done correctly. Otherwise, your trust will not be properly funded and your house may have to go through probate.
The first step is to consult your estate planning attorney and discuss what kind of trust is best for your goals. You will also want to discuss who your successor trustee will be. It may be wise to choose a backup, in case your chosen successor dies before you or becomes otherwise unable to manage the trust when needed.
Your estate planning attorney will prepare the trust document that will clearly identify the terms of the trust, the trustee and successor trustee, and all beneficiaries. Your attorney will also make sure the trust is properly executed so that it will be effective for your purposes.
It’s essential to discuss your estate planning needs with experienced attorneys who can explain your options and help you create a plan that will achieve your goals. At Beaton & Kiers, our estate planning attorneys take the time to understand your objectives and develop a plan to ensure that your wishes are honored, and that your house passes to the people you intend
To learn more about the benefits of a trust and how to put your house in a trust, contact us at 603-238-6690 to schedule a consultation.
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