Estate Planning

When Should I Put My House in a Trust?

Putting a house in a trust is an option that can help protect your assets and reduce the tax burden on your loved ones. But after being put in a trust, homes may become inaccessible to their owners. It’s important to research all the options, and if you go with a trust, to choose the right one for you. Here’s what you need to know about putting property in a trust.

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R. Tyler End, CFP®

Published October 12th, 2023

Updated March 20th, 2024

Table of Contents

Key Takeaways

Placing real estate in a trust is a strategy to ensure your home passes securely to your beneficiaries without going through probate.

An irrevocable trust can make it difficult to sell or refinance your home before it transfers to your heirs, as changes typically require beneficiary consent.

A revocable trust can help avoid probate for your home, but it does not provide the asset protection that an irrevocable trust offers, such as shielding assets from creditors.

When you start the estate planning process, one crucial decision is determining what will happen to your home after you pass away. Putting your house in a trust is an option that can protect your assets and reduce the tax burden on your loved ones.

However, once you place your home in a trust, you may lose some direct access to it, depending on the type of trust you choose. Researching all your options and selecting the trust that aligns with your goals is essential. Here’s what you need to know about placing property in a trust.

Reasons To Put Your House In A Trust

Many people associate trusts with death, but they can offer significant benefits while you’re still alive. A trust, particularly irrevocable, can protect your assets throughout your lifetime. If you place your home in an irrevocable trust, you shield it from creditors and legal actions. More importantly, this trust can help you qualify for government programs like SSI and Medicaid or gain admission to certain nursing homes with income restrictions.

It’s also important to consider how a trust can maximize benefits after your death. The primary advantage of any living trust is that it prevents your assets from going through probate. Without a trust, your estate could face higher taxes than if the assets were separated into a trust, potentially placing them in a lower tax bracket.

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Reasons Not To Put Your House In A Trust

Before deciding to put your house in a trust, thoroughly review your assets. There are valid reasons to keep your home out of a trust. Many of the benefits related to placing a house in a trust are specific to irrevocable trusts, which are trusts that cannot be changed. Once your home is in an irrevocable trust, you cannot sell or refinance it without the written consent of all beneficiaries.

Additionally, placing your house in a trust involves several steps, including appointing a trustee and completing the necessary paperwork to transfer the property into the trust. Depending on your situation, these extra steps may be considered drawbacks.

Do I Need a Trust If I Have a Will?

As you consider placing your house in a trust, you might wonder if having a will is sufficient. In some cases, a will might meet your needs, but a trust offers several advantages that a will does not:

  • Privacy: One critical benefit of a trust is the peace of mind it brings through confidentiality. While a will becomes a public document during probate, a trust remains private. Transferring your home to your heirs can occur without public disclosure, protecting your family's privacy.
  • Avoiding Probate: A trust allows your assets, including your home, to bypass the probate process. Probate can be lengthy and costly, potentially delaying the transfer of your property to your heirs. A trust ensures that your home passes directly to your beneficiaries without the need for probate court involvement.
  • Control Over Asset Distribution: A trust gives you more control over how and when your assets are distributed. You can specify conditions for the transfer of your home, such as waiting until your heirs reach a certain age or achieve certain milestones. This level of control isn't possible with a will alone.
  • Protection for Incapacity: A trust can also protect your assets if incapacitated. If you can no longer manage your affairs, the trustee can step in to manage the assets in the trust, including your home, without needing a court-appointed guardian. A will, on the other hand, only takes effect after death and doesn't offer this type of protection.
  • Flexibility: Trusts, particularly revocable trusts, offer high adaptability. You can modify or revoke the trust at any time during your lifetime, allowing you to adapt to changing circumstances. Wills, while they can be updated, don't provide the same level of flexibility when it comes to managing assets during your lifetime.
  • Asset Protection: In some instances, particularly with irrevocable trusts, placing your home in a trust can protect it from creditors and legal judgments. This level of protection isn't available with a will.
  • Seamless Transfer of Property: A trust ensures that the transfer of your home to your heirs is seamless, without the delays and costs associated with probate. This can be especially important if your heirs need immediate access to the property or other assets.

While a trust provides these advantages, it's important to note that once the home transfers to the new owner, they can no longer hide the property. The ownership change will be recorded, and the property becomes a matter of public record.

Revocable Trust vs Irrevocable Trust: Where Should It Go?

Placing your house in an irrevocable trust can provide significant benefits, but it has limitations. Once the home is in an irrevocable trust, you won't be able to sell it without the beneficiaries' consent, and you'll remain responsible for the mortgage and property taxes. However, if maintaining control over your home while avoiding probate is your primary concern, a revocable trust might be a better option. This type of trust allows you to manage and modify the trust during your lifetime, providing flexibility while bypassing probate.

Some individuals even purchase a home directly into a trust, ensuring it remains separate from other assets. It's important to note that revocable trusts do not protect your assets from creditors, which means you may forgo some protective benefits. Alternatively, placing your home in an LLC might offer similar protections without the complexities associated with a trust.

Final Thoughts

Putting your home in a trust can be a great option if you have concerns about your assets being safely passed to your loved ones. But it comes with some downsides, as well. We recommend working with a certified financial planner to determine the best way to keep your assets safe while still keeping you in control.

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R. Tyler End, CFP®
R. Tyler End, CFP®

Tyler is a Certified Financial Planner® and CEO & Co-Founder at Retirable, the retirement peace of mind platform. Tyler has nearly 15 years of experience at leading companies in the wealth management and insurance industries. Before Retirable, Tyler worked as Head of Operations Expansion at PolicyGenius, expanding the company’s reach into new products — turning PolicyGenius into an industry-leading disability and P&C insurance distributor. Before working at PolicyGenius, Tyler worked as Wealth Management Advisor at prominent financial services organizations.

As an advisor, Tyler played an integral role in helping clients define goals, achieve financial independence and retire with peace of mind. Through this work, Tyler has helped hundreds of thousands of people get the financial planning and insurance advice they need to succeed. Since founding Retirable, Tyler’s innovative approach to retirement planning has been featured in publications such as Forbes, Fortune, U.S. News & World Report, and more.

Estate Planning Guide

Intro to Estate Planning


Wills


Trusts


Divorce Considerations For Retirement


Estate Settlement

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Free Retirement Consultation

Still have questions about how to properly plan for retirement? Speak with a licensed fiduciary for free.


Estate Planning Guide

Intro to Estate Planning


Wills


Trusts


Divorce Considerations For Retirement


Estate Settlement


Share this advice


R. Tyler End, CFP®
R. Tyler End, CFP®

Tyler is a Certified Financial Planner® and CEO & Co-Founder at Retirable, the retirement peace of mind platform. Tyler has nearly 15 years of experience at leading companies in the wealth management and insurance industries. Before Retirable, Tyler worked as Head of Operations Expansion at PolicyGenius, expanding the company’s reach into new products — turning PolicyGenius into an industry-leading disability and P&C insurance distributor. Before working at PolicyGenius, Tyler worked as Wealth Management Advisor at prominent financial services organizations.

As an advisor, Tyler played an integral role in helping clients define goals, achieve financial independence and retire with peace of mind. Through this work, Tyler has helped hundreds of thousands of people get the financial planning and insurance advice they need to succeed. Since founding Retirable, Tyler’s innovative approach to retirement planning has been featured in publications such as Forbes, Fortune, U.S. News & World Report, and more.

Free Retirement Consultation

Still have questions about how to properly plan for retirement? Speak with a licensed fiduciary for free.

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Free Retirement Consultation

Still have questions about how to properly plan for retirement? Speak with a licensed fiduciary for free.

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To empower a confident, worry-free retirement for everyone.

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To empower a confident, worry-free retirement for everyone.

Legal

Retirable, Inc. ('Retirable') is an SEC registered investment advisor. By using this website, you accept our Terms and Conditions and Privacy Policy. Retirable provides holistic retirement planning services, which are available only to residents of the United States. You must be at least 18 years of age to become a Retirable Premium user. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.

Investing involves risk and past performance is not indicative of future results. Increased spending increases the risk of depleting your savings and performance is not guaranteed. It is very important to do your own analysis before making any decisions based on your own personal circumstances.

For more information, see our Form ADV Part II and other disclosures.

Retirable is a financial technology company and is not a bank. Banking services provided by Thread Bank, Member FDIC. The Retirable Business Visa® Debit Card is issued Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa cards are accepted. FDIC insurance is available for funds on deposit through Thread Bank, Member FDIC. Pass-through insurance coverage is subject to conditions.

Your deposits qualify up to a maximum of $3,000,000 in FDIC insurance coverage when placed at program banks in the Thread Bank deposit sweep program. Your deposits at each program bank become eligible for FDIC insurance up to $250,000, inclusive of any other deposits you may already hold at the bank in the same ownership capacity. You can access the terms and conditions of the sweep program athttps://go.thread.bank/sweepdisclosure and a list of program banks athttps://go.thread.bank/programbanks. Please contact [email protected] with questions on the sweep program.

* The interest rate on Retirable Consumer Deposit Account Tier 2 is 3.4% with Annual Percentage Yield (APY) of 3.45%. The interest rates are accurate as ofSep 19, 2024. Rate is variable and is subject to change after account opening. Fees may reduce earnings.

** Refer to the fee schedule in your Consumer Deposit Account Agreement

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