Why Every Homeowner Should Consider a Trust
As a homeowner, your house is likely one of your most valuable assets. Protecting that asset and ensuring it is distributed according to your wishes is crucial. That's where putting your home into a trust can provide several key advantages:
Avoid Probate:
When you pass away, any assets held in your name alone have to go through probate - the lengthy court process of validating your will and distributing your estate. Probate can be expensive, time-consuming, and public - something most people prefer to avoid.
By transferring your home's ownership to a trust, you ensure that the property bypasses probate entirely. This allows for a much smoother and quicker transition of the home to your designated beneficiaries without court involvement.
Asset Protection:
Certain types of trusts can shield your home from creditors, lawsuits, and other claims, safeguarding your valuable asset for your loved ones. For example, a Medicaid Asset Protection Trust can protect your home and savings from long-term care and nursing home costs.
Tax Benefits:
Depending on the type of trust and your state's laws, you may be able to minimize or even avoid estate taxes, gift taxes, and capital gains taxes on your home's value.
Choosing the Right Trust for Your Home
Not all trusts are created equal, and selecting the right type of trust for your specific needs and goals is crucial. Here are some common trust options to consider for your home:
Revocable Living Trust:
This trust allows you to maintain control over your assets, including your home, during your lifetime. Upon your passing, the trust becomes irrevocable, and your named trustee can distribute your assets according to your wishes without going through probate.
Irrevocable Trust:
An irrevocable trust, like a MAPT or QPRT, transfers complete ownership to the trust which provides greater asset protection and tax benefits, but you relinquish some control.
Qualified Personal Residence Trust (QPRT):
A QPRT is an irrevocable trust specifically designed to hold your primary residence or vacation home. It allows you to remove the home's value from your taxable estate while still being able to use the property.
Medicaid Asset Protection Trust (MAPT):
A MAPT is an irrevocable trust specifically designed to protect your home, and any other assets you put into it, from long-term care and nursing home costs.
Step-by-Step Guide to Putting Your Home into a Trust
Once you've determined the best trust strategy for your needs, follow these steps to properly transfer your home into a trust:
1. Create the Trust: Work with an experienced estate planning attorney to draft and execute the trust documents.Depending on the type of trust, you, one or more of your kids, or a trusted third party will act as the trustee of the trust and you can determine who inherits everything as well as any protections or restrictions you want to place on receipt of those assets when you design the trust.
2. Transfer Ownership: Legally transfer ownership of your home to the trust. This is done by preparing and recording a new real estate deed from yourself to your trustee, whether you, one of your kids, or whoever you have selected to act as trustee of your trust, in the county where the property is located.
3. Update Insurance and Taxes: Notify your home insurance provider and local tax authorities about the ownership change to ensure proper coverage and tax assessments.
4. Maintain the Trust: Continue to manage the trust according to its terms, including paying any necessary fees, taxes, and maintaining the property.
By taking these steps and working with a qualified estate planning professional, you can enjoy the peace of mind that comes with knowing your home is properly protected and your wishes will be carried out according to your plan.
If you would like to put a plan in place to make it as easy and inexpensive as possible for your family to take care of everything if something were to happen to you, call us today to schedule a consultation at our Minnetonka, Minnesota office at (763) 420-5087 or our Florida office at (941) 909-4644 or fill out the contact form on this page and a member of our team will contact you to schedule your consultation.
Or, if you are not yet ready to schedule a consultation and would like additional information, we have some resources for you.
If you would like to learn more about wills and trusts and how you can make it as easy and inexpensive as possible for your family, Click Here to sign up for my online masterclass where I reveal insider strategies for your will, trust, financial power of attorney and health care documents, as well as how to minimize or even avoid estate taxes, and how to protect the money you leave for your children and grandchildren in the event they get divorced, get sued or something else happens to them.
If you would like to learn more about how to protect your home and savings from long-term care and nursing home costs. I have two resources for you:
