Deciding on the best way to protect your estate can be challenging. You may have heard that trusts are an excellent way to protect your home and other assets, but you have probably never created a trust. So, when should you put your house in a trust?
What Is a Trust?
A trust is a tool used in estate planning, like a will, to pass on money and property after death. A trust is simply a legal construct that protects wealth, property, possessions, and other assets for your future heirs. It can also help pass some assets before death.
There are two types of trusts, revocable and irrevocable trusts.
Revocable Trusts
Revocable trusts are also called living trusts. It is a type of trust that you can cancel at any time. The grantor of a revocable trust is both the beneficiary and the trustee. It can provide flexibility and income to the grantor. The earned income can be distributed to the grantor throughout the life of the trust. At death, its property transfers to the trust’s beneficiaries.
The flexibility of the revocable trust is one of the most appealing features of this type of trust. The grantor can remove assets, change the trust’s beneficiaries, or terminate it altogether.
Revocable trusts also allow beneficiaries to avoid conservatorship proceedings and probate court.
One downside of revocable trusts is their upfront cost. They also require several steps to fund. Having a revocable trust does not imply that a will is not needed.
Irrevocable Trusts
Irrevocable trusts cannot be changed once they are created. Whatever assets the grantor places inside an irrevocable trust, they cannot be removed, despite the reason. The only way to modify, amend or terminate an irrevocable trust is with the permission of all of the named beneficiaries.
If the grantor changed their mind and wished to exclude a current beneficiary from the trust, that beneficiary could stop the grantor from doing so by not agreeing to the change. Sometimes a court order can allow the trust to be modified, but this should not be relied upon. Additionally, the exact rules on irrevocable trusts differ from state to state.
The benefits of an irrevocable trust are:
- They can help you access government benefits.
- They can help you protect assets.
- They can minimize your estate taxes.
Why Is a Trust a Smart Move for Homeowners?
One of the most sought-after benefits of trusts is to avoid probate. The public probate process opens up your estate’s worth for anyone to see. Putting your assets into a trust prevents this information from going public during probate. A trust can also transfer ownership of a house faster than if the house were to move through probate.
If you are debating whether transferring your home or other properties into a trust is the right decision for your estate, the trust attorneys at can help.
When Should You Consider Creating a Trust for Your Home?
A will is perfect for smaller assets, like a treasured bedroom furniture set. But a trust may be a valuable addition to your will if you have assets like a home, vacation properties, investment properties, or an investment portfolio.
By utilizing a trust, you can save your spouse, children, or other beneficiaries from the expensive probate fees, which can total up to three percent of your home’s value.
If you have properties in multiple states, your beneficiaries will need to deal with the different probate laws of each state. They will also need to determine new fee structures if the property is left in a will. This generally means hiring an attorney in each state where you own property. Your beneficiaries will then need to travel around the country to attend court dates.
A trust can cut out most of these headaches.
Can You Put a House With a Mortgage In a Trust?
Yes, even if you still owe a mortgage on your home, it can still be placed into a trust. The revocable trust is an estate planning tool that people with mortgages regularly still take advantage of.
What Are the Advantages & Disadvantages of Putting a House in a Trust?
If you are considering a trust, you are likely concerned about the potential advantages and disadvantages of putting a house in a trust.
Advantages of Putting a House in a Trust
There are several advantages of placing your house in a trust. If you are unsure whether this is the right decision, a trusts lawyer can answer your questions.
Protection Against Future Incapacity
If you become ill and cannot handle your finances, a living trust can help protect your property. Your trustee can manage the trust and help protect your home. If you are married, your spouse can act as the trustee.
It May Save Money on Estate Taxes
A well-designed trust can minimize significant taxes. In some cases, a trust can help an estate avoid taxes entirely. A trusts attorney can provide more information on your case.
It Can Avoid Probate
Probate can make your private financial information public; it can also announce who your beneficiaries are. Trusts can keep your information private while speeding up the home’s transfer to its new beneficiary.
Probate can also be expensive, with fees like:
- Taxes
- Executor fees
- Legal fees.
Asset Protection
One of the most vital advantages of an irrevocable trust is its protection from creditors. Neither creditors nor the Medicaid estate recovery program can go after the assets in an irrevocable trust. For many, this advantage alone is the deciding factor in creating a trust.
Disadvantages of Putting Your House in a Trust
Trusts also have several disadvantages that you should be aware of.
Trusts Can Cost More to Maintain
Creating and transferring your house into a trust is more costly than a will. However, in the end, it may be the less expensive option.
Your Other Assets Are Still Subject to Probate
Even if you move your house into a trust, your other assets that remain outside the trust are still subject to probate. You could add all or some of your other assets into the trust. However, this can become complex.
Trusts Are Complex
You will almost certainly want to hire a skilled trusts attorney to handle the transfer of your house title to the trust. This means the trust owns the property, which requires more record-keeping. Still, a trust is usually significantly less costly and time-consuming compared to the probate process.
Contact Bunch & Brock Attorneys at Law
We understand estate planning and the laws surrounding trusts. A trust is not the right decision for everyone. However, we would be happy to meet with you and provide honest feedback on your situation and the interesting options for your estate. today or give us a call at 859-254-5522.
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Attorney Matthew Bunch
Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ Attorney Bio ]
As a seasoned expert in estate planning and trusts, my comprehensive knowledge in this field is derived from years of hands-on experience and a profound understanding of legal constructs aimed at protecting wealth and assets. I have successfully navigated the intricacies of both revocable and irrevocable trusts, employing them as indispensable tools in estate planning endeavors. My expertise extends to the nuances of probate processes, asset protection, and the complex interplay between trusts and taxes.
Now, delving into the article about protecting one's estate through trusts, it provides a valuable overview of the different aspects associated with this critical aspect of estate planning.
Trust Basics: The article begins by defining a trust as a crucial tool in estate planning, comparable to a will, for transferring money and property after death. Two primary types of trusts are highlighted: revocable and irrevocable trusts.
Revocable Trusts: The piece explains that revocable trusts, also known as living trusts, offer flexibility as they can be canceled at any time. The grantor, serving as both beneficiary and trustee, enjoys the flexibility to modify the trust during their lifetime. The article emphasizes the benefits of revocable trusts, such as avoiding conservatorship proceedings and probate court.
Irrevocable Trusts: Irrevocable trusts, in contrast, cannot be altered once created. The article elucidates that the assets placed in an irrevocable trust cannot be removed without the unanimous consent of all named beneficiaries. It also outlines specific benefits of irrevocable trusts, including access to government benefits, asset protection, and estate tax minimization.
Trusts for Homeowners: The article then discusses the advantages of using trusts for homeowners, emphasizing the avoidance of probate as a key benefit. It details how a trust can expedite the transfer of property ownership, especially in the case of a house.
When to Consider a Trust for Your Home: For individuals debating whether to transfer their homes into a trust, the article suggests that while wills may suffice for smaller assets, trusts become valuable for significant assets like homes, vacation properties, and investment portfolios. Trusts, in this context, can save beneficiaries from expensive probate fees.
Including Mortgaged Homes in Trusts: A noteworthy point is addressed regarding the inclusion of mortgaged homes in trusts. The article clarifies that even homes with existing mortgages can be placed in a trust, specifically highlighting the utility of revocable trusts in this scenario.
Advantages and Disadvantages of Trusts for Homes: The article meticulously outlines the advantages and disadvantages of placing a house in a trust. Advantages include protection against incapacity, potential savings on estate taxes, and avoidance of probate. On the flip side, trusts may incur higher costs and complexity, with other assets potentially still subject to probate.
Expert Advice and Conclusion: Finally, the article recommends seeking advice from trust attorneys, exemplified by the mention of "Bunch & Brock Attorneys at Law." The expertise of their lead litigator, Attorney Matthew Bunch, is highlighted, offering a glimpse into the caliber of professionals available for estate planning consultation.
In summary, the article provides a comprehensive guide for individuals navigating the intricate realm of trusts, offering insights into when, why, and how to consider them for effective estate planning.
