ESTATE PLANNING: 7 Reasons to Put Your Home in a Trust

A property trust is a legal entity set up to pass down assets to beneficiaries after a grantor’s passing. In addition to making the transfer of ownership as smooth as possible, there are several benefits to putting your home in a trust. Here are eight reasons you might want to consider putting your home in a trust.

I have many clients that ask me if it is necessary to put their home in a trust and I always say, “necessary? No. But the smart thing to do? Yes” I have compiled a list of the main reasons to consider creating a trust and the benefits that it can bring to you and those you care about.

1. Avoid Probate 

One of the primary reasons to put a home in a trust is to avoid probate. Courts ultimately decide asset distribution to your heirs in probate. Probate often involves a long legal process. Even with a will, an estate will go through probate. But by placing property in a trust, you can skip the probate process, and your heirs can receive the home or other assets as quickly as possible.

2. Continuity of Ownership 

For people with ancestral homes, ownership can continue for several generations through a trust. With a trust, heirs will receive property quickly without legal questions regarding ownership.

3. Maintain Privacy

In a trust, estate distribution is private, which includes confidentiality about transfer details. If the home is not placed in a trust, it will likely go through the probate process. As part of that process, information about the assets involved, how the distribution will occur, and the names of beneficiaries will become public. Placing a home in a trust will ensure that the transfer of ownership remains confidential. 

4. Potential Reduction in Estate Taxes 

Generally, an estate is subject to various state and federal taxes. However, in certain situations, placing a house in a trust qualifies it for a reduction in estate taxes. If the grantor creates an irrevocable trust, they may qualify for a stepped-up tax basis. When the property is sold, there is a possibility of lower capital gains and estate taxes. The potential for reduction of estate taxes depends on multiple factors. It is wise to consult a financial planner to determine the best type of trust for your situation.

5. Safety Net for Incapacity  

Placing your home in a trust offers a safety net in the event you become incapacitated. If you cannot manage your assets or home, a trustee will manage the property and pay taxes, bills, and dues on your behalf. This trust arrangement will eliminate any worries about your home if you cannot manage your property. 

6. Control the Distribution of Your Assets 

With a trust, you can stipulate when and who should receive your assets and home. If you have concerns about how beneficiaries will use your home or assets, you can stipulate age limitations and asset distribution. This trust arrangement will also help with any potential family disputes since it is clear who will receive the assets or the home.

7. Protect Your Home From Creditors 

In certain instances, placing a home in a trust prevents creditors from taking your home as collateral to pay outstanding debts. To receive this protection, a trust must be irrevocable, which means the terms cannot be altered once established. A creditor may pursue a revocable trust.

This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.