Put Your House in a Trust: Here's Why It’s Worth It

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By Michael Warford Updated August 26, 2024
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Edited by Cara Haynes

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A trust is a legal arrangement where assets or property are held by the trustee for the benefit of a beneficiary. Putting a house in a trust comes with a number of benefits for all parties invovled, chief among them being the ability to avoid a potentially contentious probate process.

Travis Christiansen, an attorney at Boyack Christiansen Legal Solutions, says, “One of the great advantages of doing trust-based estate planning is you don't have to do probate, so long as the real estate is titled and owned by the trust.”

Other advantages are that trusts provide greater control and privacy, more protection over assets, and increased flexibility with asset distribution. They’re also of benefit when beneficiaries are not capable of handling their own finances.

How putting your house in a trust works

There are several different types of trusts, with the most common being revocable (also called living) and irrevocable trusts.

A revocable trust can be changed and revoked by the person who creates it (known as the grantor) during their lifetime. This type of trust is most often used for avoiding probate, managing assets, and maintaining privacy. However, it doesn’t protect assets from creditors nor does it offer many tax benefits.

An irrevocable trust, on the other hand, cannot be changed or revoked once it’s created. Essentially, the grantor gives up control over the assets in the trust unless all the beneficiaries or a court consent otherwise. In exchange for this loss of control, the assets are protected from creditors and there are more estate tax benefits than what a revocable trust provides.

Can a trust buy a house?

Yes, a trust can buy a house, with the purchase itself managed by the trustee. The title will be held in the name of the trust and the trust document will specify the trustee’s authority for buying, selling, and managing the house.

A trust buying a house can be part of a broader estate planning strategy as it may help avoid probate or provide support for beneficiaries.

However, getting approved for a mortgage can be more challenging for trusts than for individuals. Lenders often have higher mortgage requirements for trusts, although some lenders specialize in working with them.

The trustee will also need to stay on top of property taxes, insurance, and maintenance. There are also tax implications for a trust buying a house, so the trustee should consult with a real estate attorney or tax advisor.

4 reasons to put your house in a trust

There are a number of benefits to putting a house in a trust. Some of the top ones include:

  • Avoiding probate: When the grantor passes away, a house that is in a trust generally doesn’t have to go through probate. As a result, transferring ownership of the house tends to be faster and less costly than going through probate court.
  • Protection from creditors: So long as the house is in an irrevocable trust, it’s generally protected from creditors and legal judgments. This is because the house is not considered part of a personal estate.
  • Managing assets during incapacity: A trustee can manage a house that’s in a trust for a beneficiary who is incapable of making their own financial decisions, such as children or individuals with special needs. As a result, there’s no need for a court-appointed guardian or conservator to manage the house.
  • Flexibility and control: A trust gives you greater flexibility in how an asset such as a house is distributed. For example, you can specify at what age a beneficiary is to take ownership of a house and you can manage multiple properties under a single trust.

 How to put your house in a trust

The process for putting a house in a trust can vary, depending on where you live and the type of trust you’re using. That’s why you should work with an estate planning attorney throughout this process. In general, the process goes like this:

1. Work with a trusted attorney or financial planner.

An attorney or financial planner can help you make sure the process of setting up a trust and transferring a home into it goes smoothly. An attorney is especially important for understanding the role and responsibility you’re giving to a trustee.

As estate planning and elder law attorney Rebecca Goldfarb of Goldfarb & Luu says, “[Grantors] should be talking to the lawyer to get advice on what does this really mean? What power does this trustee have? What’s the right person to put in that role?”

2. Choose the right type of trust.

The type of trust you choose will depend on your goals. For example, if you’re primarily concerned with avoiding probate and ensuring a smooth inheritance of your property after you pass away, a revocable (or living) trust may be best. However, if you’re primarily concerned with protecting assets from creditors or with minimizing estate taxes, then an irrevocable trust may be more suitable.

3. Create the trust.

Once you’ve decided on which type of trust is best, you’ll need to create a trust document. This document outlines the terms of the trust, including the role of the trustee and beneficiaries and how the house is to be managed.

When you establish the trust, you’ll also need to appoint a trustee, who can be either an individual, such as an attorney, family member, or friend, or an organization, such as a bank. The trustee will be responsible for managing the house, such as paying taxes and insurance, performing maintenance, and, if necessary, selling or transferring ownership of it.

4. Transfer ownership to the trust.

To actually transfer ownership of a house to a trust, you’ll need to obtain a new deed that lists the trust as the owner. This deed will then need to be signed by the grantor in front of a notary public. Finally, to make the transfer official, file the executed deed with your county recorder office or with the land registry of the county where the house is located.

How to put a house with a mortgage in a trust

You can transfer a house with a mortgage into a trust if your mortgage agreement allows it. Before setting up the trust, review the terms of your mortgage agreement. If your agreement has a “due-on-sale” clause, then the balance of the mortgage may need to be paid off if the house is transferred to a new owner, including a trust. 

If your mortgage agreement allows it, you can then transfer ownership to the trust by following the steps outlined above. Once the transfer is complete, notify your mortgage lender and provide them with a copy of the trust agreement and deed. Ensure that the trust agreement also outlines the trustee’s responsibility for making mortgage payments.

Who pays the mortgage on a house in a trust?

The trustee handles mortgage payments on a house in a trust. Typically, the mortgage is paid using funds from the trust’s own bank account. If the trust generates income, such as through rental properties, then that income can also be used to pay the mortgage.

Ownership, control, and costs with putting your house in a trust

Does a trustee own the property in a trust?

No, the trustee doesn’t own the property when its in the trust. The trust itself is the legal owner of the house. However, the trustee is an agent or fiduciary of the trust, meaning they have the authority to manage the property on the trust’s behalf.

The trustee’s responsibilities are set out in the trust document. They often include making mortgage and insurance payments, maintaining the property, handling any income or expenses from the property, and distributing the property or its benefits to the beneficiaries. Trustees have a fiduciary duty to act in the best interests of the beneficiaries.

The grantor, meanwhile—as the person who created the trust—is responsible for laying out the responsibilities of the trustee, selecting beneficiaries, stipulating how assets should be distributed, and how those assets should be managed. In the case of a revocable trust, the grantor can also change or revoke the trust.

How much does it cost to put your house in a trust?

The cost of putting a house in a trust depends on the complexity of the trust, where the property is located, and other factors. Legal fees will set you back anywhere from $1,000 to more than $5,000, depending on the trust’s complexity.

Deed transfer and title search fees will usually cost between $250 to more than $900. If required, an appraisal will set you back another $300 to $700.

Once the trust is set up, you’ll need to pay ongoing fees for administration. These are charged as either a percentage of the assets or at an hourly rate. Professional trustees generally cost between 0.5% to 1% annually of the trust’s assets. Tax preparation services also cost extra and vary widely depending on the complexity of the trust.

Don’t put your house in a trust without first consulting with a legal professional, such as an estate planning attorney and tax advisor. Trusts can become extremely complicated, which makes predicting their actual costs difficult. Only a professional can give you a reliable idea of how much your trust will cost to create and administer.

Selling a house in a trust after death

To sell a house in a trust after the death of the grantor, you’ll generally need to follow these steps:

  1. Check the trust document: The trust document should include instructions for handling and selling the property and spell out the trustee’s role in handling the sale.
  2. Consult with professionals: You should consult with an estate planning attorney to ensure that the sale complies with the trust. A financial advisor can also help with tax considerations.
  3. Work with a real estate agent: A real estate agent can help you prepare the house for sale and list it on the market. The agent will also assist with pricing and negotiations with buyers.
  4. Review offers: Offers are reviewed by the trustee, who has a duty to select the one that is in the best interests of the beneficiaries.
  5. Close on the sale: The trustee, on behalf of the trust, will sign the sale agreement and transfer the title to the buyer. The trustee may also have to ensure that the outstanding mortgage and closing costs are paid.
  6. Distribute the proceeds: The proceeds of the sale will be transferred to the trust’s bank account. Depending on the instructions in the trust document, the funds may be distributed to the beneficiaries or used for some other purpose.

Be aware of tax implications

Capital gains taxes may be owed on the sale of the house. The amount owed, if any, depends on how soon after the grantor’s death the house was sold, the type of trust, and the state the house is located in. Estate taxes may also be due if the estate’s value exceeds the federal estate tax exemption, which is $13,610,000 for grantors who died in 2024.

Where you live will also play a big role in tax liability. As Travis Christiansen says, “In some states, you may have some inheritance tax or estate tax, but that's going to vary from state to state. You're going to want to make sure you've got a good tax attorney or CPA that's familiar with these things to help.” 

Final take: put your house in a trust if you can

There are many good reasons for putting a house into a trust, from avoiding the delays and costs associated with probate to ensuring that beneficiaries are adequately taken care of. However, trusts can be costly and complicated. You’ll want to consult with a professional in order to decide the type of trust that is right for you. If that’s something you can afford, we recommend putting your house in a trust.

The same advice applies if you’re considering selling a house that is in a trust. Just as with any house sale, an experienced real estate agent can help you get a fair price for the property and ensure a smooth sale.

Working with Clever, you can find a top local realtor who has the necessary experience to handle the sale of a house in a trust. When you find your listing agent through Clever, you can compare top agents who will work for an exclusive insider rate of just 1.5% — roughly half the traditional fee. Get matched with local Clever agents today.

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