Putting your house in a trust can be a great way to protect your assets, simplify estate planning, and provide for your family’s future. We’ll discuss how to place your house in a trust, and the advantages and disadvantages of doing so, to help you be prepared to make informed decisions about your assets.

Why Put Your House in a Trust?

Your house is one of the most valuable assets you own, and a major component of your overall estate plan. Here are some of the key benefits of putting your house in a trust:

• Bypassing probate: When you pass away, a home in a trust avoids going through probate, which can be a lengthy and costly court process. This allows for a faster and simpler transfer to beneficiaries. However, to avoid probate you will also have to make sure your other assets would not require probate to transfer to your beneficiaries. 
• Privacy: Unlike wills, which become public records after death, trusts remain private. This means details about your property and beneficiaries aren’t disclosed publicly.
• Estate planning flexibility: A trust lets you control how and when your beneficiaries receive your assets. For example, you can specify that your children receive the home only after reaching a certain age.
• Protection from estate taxes: Some types of trusts can reduce estate taxes, though this depends on the value of your estate and the type of trust you choose. Indiana does not have an estate tax and the federal estate tax exemption is so high, it does not apply to many individuals. 
• Protecting beneficiaries: If you’re concerned about future family disputes, potential divorce of a beneficiary, or the financial management of your heirs, a trust can help protect and guide how the property is handled.

Types of Trusts for Real Estate

While there are several types of trusts, there are primarily two that are used when it comes to real estate assets:

• Revocable living trust: The more flexible option, as you can alter or dissolve it during your lifetime. You keep control over the property in the trust and can modify the trust terms at any time, the trust only becomes irrevocable upon your death.
• Irrevocable trust: Once assets are placed in this type of trust, the terms cannot be changed without permission from beneficiaries and you no longer have ownership of the assets you transfer to the trust. While you lose some control, irrevocable trusts offer greater protection in certain tax situations and from creditors. A special version of such a trust can also help individuals in pre-planning for long term care with Medicaid asset protection. 

There are pros and cons to each, and the best option depends on your need for flexibility, control over the property, and tax implications. Consulting an estate planning attorney can help you understand the best option for your individual needs.

How to Put a House in a Trust: A Step-by-Step Guide

If after speaking with an attorney, you’ve decided a trust is the best way to protect your property and manage your estate, there are several steps you need to take. Establishing a trust is a legal process, which means you’ll need to make sure everything is in order and done correctly for it to be valid and accomplish the estate planning goals you have.

Step 1: Choose the Type of Trust

Before you can transfer assets into a trust, you first have to create the trust. As we mentioned, there are two primary types of trusts generally used with real estate; a revocable living trust and an irrevocable trust. Decide which one you think is best for your situation based on your need for flexibility, tax advantages, and personal preference.

Step 2: Create the Trust Document

The trust document details the terms of the trust, including who will manage the trust (also known as a trustee), and how your property will be distributed to beneficiaries. If establishing a revocable trust, you’ll typically name yourself as the initial trustee and designate a successor trustee to manage the trust should you pass away or become incapacitated. 

This step is crucial to get correct, as an improper trust may result in severe legal and financial consequences for you and your beneficiaries. You are not required to have legal representation in Indiana in order to form a trust, but for something as important as your house, it’s a good idea to consult a legal expert.

Step 3: Transfer Your House Title to the Trust

To legally place your house in the trust, you will have to transfer ownership of the house from you to the trust. This generally involves filing a new deed with the county recorder’s office where your property is located. This is another step that is crucial to do correctly, so be sure to ask questions at the recorder’s office or seek legal advice before signing anything. The probate avoidance benefits of a trust do not work unless your trust owns the property.

What Happens to a House in a Trust After Death?

A big advantage of placing your house in a trust is that it will pass directly to your beneficiaries without going through probate. This helps your family and loved ones have immediate ownership of the house, while also avoiding disagreements on who should have control over the property.

Keep in mind that it also depends on the terms of the trust. You can choose to pass the house to your beneficiaries, but you can also choose to have it sold, grant it to a charitable organization, or retain it within the trust for a certain period of time. There are many ways to set up a house in a trust, and you have to consider all aspects of your estate planning when doing so.

How an Estate Planning Attorney Can Help Put Your House in a Trust

For over 70 years, BB&C has been a reliable estate planning partner for clients and their families in Indiana. Our experienced attorneys are experts in estate and trust planning and provide dedicated, high-quality legal assistance.

Deciding how to handle your home in your estate planning is a huge undertaking, and one you shouldn’t undertake without understanding the ramifications of your decisions. In many circumstances, clients learn that trusts aren’t actually necessary to accomplish their estate planning goals and that there are less expensive and more efficient options for your overall estate plan. 

Even if a trust is right for you, there are other documents that must be drafted for the trust to be effective and to address other critical estate planning needs such as general powers of attorney and healthcare advanced directives. If you need help creating a comprehensive estate plan and have questions about whether setting up a trust is right for you, contact BB&C today for a consultation. Our team is here to guide you every step of the way.

Disclaimer: The information in this blog is intended for general purposes only. It does not constitute legal advice. Please consult an attorney for specific advice based on your unique circumstances.