Putting your house in a trust can provide you and your family with various benefits, from avoiding probate to Medicaid qualification.
Usually, people use a last will and testament to pass on a house. But in some cases, placing it in a trust can be wiser.
The main benefits of putting your house in a trust are:
- To avoid probate.
- Transfer the title of the home quickly to your heirs.
- Minimize estate taxes.
- Add more advanced terms and conditions than a will allows for.
- Pass assets to your heirs before you die.
- Help you qualify for medicare by reducing your taxable estate.
- To gain asset protection from creditors.
What is a Trust?
A trust is a legal structure that can hold and own money, possessions, property and other assets. The trust creator (trustor) gives a selected individual (trustee) the right to manage the trust in the best interests of the beneficiaries.
Trusts offer far more control for asset distribution than a will. For example, you can set milestones and instructions that must be met before an asset is shared.
Reasons Why You Should Put Your House in a Trust
Avoid The Probate Process
The most common reason to put your house into a trust is to avoid probate.
The probate process occurs after someone dies and is where a court proves the authenticity and validity of their will, before ensuring assets are distributed correctly.
- Probate can be stressful and tiring. Any minor complication can cause it to drag on for months, while major complications or disputes can result in years of delays.
- Probate dispute resolutions are also often expensive and complicated. They can rip families apart. As much as 10% of your estate can be lost through probate-related fees.
- So when it comes to your house, a trust can ensure your loved ones gain ownership of it fast and without complications. It’s far harder to dispute your instructions, and you can control when and how it’s distributed.
Learn more: Why Avoid Probate?
Protect Your Family’s Privacy
- Probate is also very revealing. Every will and estate that passes through probate in Florida will go into the public record. So anyone can see what the family-owned, how much it was worth and who received it.
- Trusts, however, remove all of that. Trusts remain an entirely private affair. They do not require the input or approval of a court and can allow for the near-instantaneous transfer of assets.
Pass Your Home Before You Die
- Putting your house in a trust can also allow you to transfer it before you die. A will, however, only becomes active after you die.
- That’s because trusts allow the creator to place conditions and instructions regarding when and how assets are distributed.
- A common example of this is to have your home transferred if you become incapacitated or require long-term care.
- Doing this can significantly reduce the stress placed on a family in a health crisis. They won’t have to worry about managing the home with their parents unable to take control, and instead can seamlessly gain the title.
Tax Implications of Putting a Will into a Trust
- Putting your house in a trust can also reduce the impact of estate taxes.
- In Florida, there are no state estate taxes, but if you’re very wealthy, then federal taxes may apply.
To Protect It From Creditors
- Should you use a revocable trust, you can protect your property from creditors that may come after it if you owe them money.
For Medicaid Eligibility
- With the help of an estate planning lawyer you may be able to lower your taxable estate by placing assets such as your home into a trust.
- Doing so may allow you to meet Medicaid’s low asset limit, while still ensuring your children get access to your investment.
When You Shouldn’t Put a House in a Trust
As with most advanced estate planning options, you need to consider the potential downsides too.
You Can’t Afford the Costs
- Setting up a trust is not free. Depending on the type of trust and where you live, it can vary.
- In Florida, a simple trust could cost a few hundred dollars, but a more complicated and large trust could cost over $1,000.
- Why? Because you’ll need an experienced and reputable estate planning attorney to ensure it’s watertight, legal and set up to help your family optimally.
- On the other hand, a complicated probate process can see you lose as much as 10% of your estate’s value.
You’ll Be Waiting for Probate to Pass Other Valuable Assets
- Setting up a trust may also not be worth it for you if you’re set to have other valuable assets pass through probate.
- However, if your home is your only major investment, or you plan to have your other assets in your trust, then it may be worth it.
- Deciding whether it is worth it will depend on your wishes, circumstances and estate complexity.
- You should speak to an estate planning lawyer as there is no blanket answer.
Which Type of Trust Should I Put My House Into?
There are various types of trusts that you could consider putting your home into. The two most common are revocable trusts (known as living trusts) and irrevocable trusts.
Talk to a specialist trust planning lawyer to determine the type of trust best for you.
Revocable trusts, also referred to as living trusts, are created during your lifetime. They can be modified or revoked at any moment during your life.
Most people use revocable living trusts due to the extra control of asset distribution. For example, if you place your house in a revocable trust, you can change the terms or even remove it at any moment during your life.
Once you pass away, the trust becomes irrevocable.
As the name suggests, irrevocable trusts cannot be revoked once you’ve created it.
While this is a distinct disadvantage, you can also benefit from things such as improving your Medicaid eligibility (by lowering your taxable estate) or other income-related qualifications.
Assets in irrevocable trusts are also protected from creditors and the Medicaid estate recovery program, so your assets are protected should you hit financial issues.
Irrevocable trusts will require their own tax returns filed by the trustee.
How to Put Your House into a Trust
- To put a house into a trust, you first need to set up a trust.
- You’ll need to choose which type of trust is optimal for you and your family.
- Contact an estate planning lawyer for expert advice and guidance through the process.
- Create a trust document, outlining your beneficiaries and your desired terms and instructions for when they should receive the house.
- Prepare a new property deed. You can copy your existing one, but update it by making the trust the new owner – ask your estate planning attorney for help.
- Get the new property deed notarized – it must be signed in front of a notary public to authenticate it.
- File the deed with the county clerk’s office, which holds local property records in your local area.
Will I Lose Control Of My Home When Putting A House Into A Trust?
No. If you’re the trustee, you will still retain control of the assets in your trust. The trustee controls buying, selling, gifting, mortgage and changing assets on behalf of the best interests of the beneficiaries.
If you’re the trustee, then effectively nothing changes except the names on the titles.
Can I Put Other Items and Assets into the Trust?
Yes. You can put as many other items and assets into the same trust as the house, as you like. Many people will put valuable assets such as real estate, stocks, collectible items, insurance and bank accounts into a trust.
Can a House in a Trust Get a Homestead Exemption in Florida?
Homes placed inside a revocable trust in Florida will still qualify for the homestead exemption.
Florida law entitles individuals to the homestead exemption regardless if the property is in a living trust.
Married couples are often advised to avoid passing their home into a trust until their spouse has passed away.
Unmarried couples, or couples with creditor issues, Medicaid eligibility issues, complicated family lines or tax concerns may be advised otherwise.
Hire an Estate Planning Attorney for Trusts in St Petersburg, FL
If you’re interested in creating a trust to put your house in, then our Florida estate planning attorneys can help. From advising you to creating the trust documents, we’ll make the process smooth and optimized.
Battaglia, Ross, Dicus & McQuaid, P.A. is U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning experienced estate planning attorneys, they can help you create a will or trust.