Living trusts have become a popular estate planning tool for many homeowners because they offer the potential for probate avoidance and provide a mechanism to manage assets during one’s lifetime. Putting your house in a living trust ensures that upon your death, your home is transferred to your designated beneficiaries without the hassles of the probate process. However, while the concept of a living trust is relatively universal, the specific details and procedures can vary by state. Below is a general step-by-step guide on how to place your house in a living trust:
1. Decide on the Type of Trust: First, you need to determine the type of living trust you want:
- Revocable Living Trust: This is the most common type, allowing you to maintain control over the trust assets and make changes during your lifetime.
- Irrevocable Living Trust: Once created, this trust cannot be easily changed or revoked. It offers certain tax and asset protection advantages but at the cost of giving up control.
2. Choose a Trustee: While many people opt to be their own trustees, you can also choose a trusted individual, bank, or trust company. The trustee will manage the trust’s assets and ensure proper distribution to beneficiaries upon your passing.
3. Draft the Trust Agreement: This is the legal document that creates the trust. It’ll detail how the trust should be operated, name the beneficiaries, and provide any other specific instructions. While there are DIY trust kits available, at Dynasty we make it easily with a simple online workflow to create a trust in minutes.
4. Fund the Trust with Your House: To transfer your house into the trust, you need to:
- Prepare a New Deed: This deed will transfer ownership from you (or your current ownership entity) to the trust. The exact type of deed (warranty deed, grant deed, etc.) will depend on your state’s regulations. Generally you can call any title company in your city to have this prepared for you or there are many online form services for every state.
- Sign the Deed in the Presence of a Notary: Ensure that you comply with your state’s notarization requirements.
- Record the Deed: Submit the signed and notarized deed to the county recorder’s office in the county where your home is located. Some states may also require a Preliminary Change of Ownership form or a similar document.
5. Notify Your Mortgage Lender: If you have a mortgage on your home, inform your lender of the transfer. Transferring property into a trust might trigger a “due on sale” clause in your mortgage agreement, although federal law generally prohibits lenders from calling a loan due in such circumstances.
6. Adjust Property Insurance: Contact your home insurance provider to ensure that the trust is listed as an insured entity on your policy.
7. Keep the Trust Updated: Life circumstances change, and so might your wishes regarding your assets. Review and amend your trust as necessary, especially after significant life events like marriage, divorce, birth of a child, or purchasing new real estate.
Final Thoughts: While this guide offers a general overview, it’s crucial to understand that the specifics can vary by state. Always consult with local professionals familiar with your state’s laws and regulations when setting up a living trust. Properly executing each step ensures that your trust operates as intended and provides the protection and benefits you desire for your home and beneficiaries.