Is it a good idea to put your house in a trust?
The main benefit of turning your home into a trust is the ability to avoid probate procedures. Putting your home in a trust fund will keep some details of your estate private. The estate process is public knowledge, while the transfer of a trust from a grantor to a beneficiary is not done. One of the main reasons you can put your home in a trust fund is that your family can avoid a lengthy and expensive estate process after you die.
Without a trust, the division of your assets can take a few months to a year, at an estimated cost of 3 to 7% of the property’s value. When your family mourns your death, the last thing they want to do is deal with unnecessary financial or legal hurdles. A trust will save your loved ones from probate proceedings when you die. A living trust is the most efficient way to pass on assets to your heirs after your death.
A trust allows you to split the amount of your estate according to your wishes. You can name assets that are headed for a specific purpose or over a specific period of time. Certain trusts can also be used to avail the exemptions from capital gains, create a succession plan for a family business, or keep the financial situation private. Special features of a trust are not published. When you create a living trust, you will be referred to as a settlor or a grantor, depending on which state you live in. With an irrevocable trust, it’s irrevocable once you transfer ownership of the house to the trust, which means you can never take it back.
Converting a house into a trust gives you more control over who will make those decisions and saves your loved ones from moving through the court process to setting up the conservatory at an already emotionally difficult time. If there are no provisions in the fiduciary language that prevent you from doing so, you may be able to let the trustee transfer the home to you and sell it yourself. However, if you plan to enter into a new financial arrangement for your home, tell your lawyer and financial advisor before you start the trust. The complexity of designing a trust versus a simplified will can increase the cost of using this method of protection.
By leaving assets to a trustee for the benefit of someone else, you can solve a handful of potential problems. In addition to converting a house into a trust, there are other assets that you should title in the trust’s name. When you create a trust, you determine how and under what conditions your assets should be distributed among your beneficiaries. Since there is no probate procedure if you have a living trust, you don’t have to publish your assets.
Before I go into the benefits of creating a trust for your home, you first need to understand the difference between a “revocable trust” and an “irrevocable trust.” If your estate is likely to be facing federal or state taxes, you should talk to a lawyer about preparing a trust. A live or revocable trust allows you to have complete legal control and ownership of your assets until your death. When you create a revocable living trust, you retain full rights to the property and may not see an impact on your ability to continue an existing mortgage.