Maximizing Your Estate Plan: The Benefits of Putting Real Estate in a Trust

A trust is an indispensable tool in estate planning, providing critical benefits for the owner of the trust and their beneficiaries. There are many types of trusts, each serving different purposes. The benefits of using a trust, whatever type it may be, depend on your specific needs and how you set it up. Setting up a trust for your real estate is one of the most valuable applications of this estate planning strategy. This is because real estate is the most common, and often the largest, component of a person’s estate. In this post, you’ll learn all about putting your real estate in a trust and the benefits it can provide.

Basics of Putting Your Real Estate in a Trust

Establishing a trust involves creating a distinct entity to hold ownership of your properties. As the trustor or creator of the trust, you assume the role of trustee during your lifetime, overseeing and managing the trust's affairs. Additionally, you will designate a successor trustee to assume responsibilities in the event of your incapacity or demise. By transferring real estate ownership to the trust, you unlock a host of protective and managerial benefits.

Trust Benefits for Real Estate and More

Below is a list of the general benefits of having a trust for your real estate. You can enjoy additional benefits if you use specific terms, provisions, and other advantageous methods available for your specific situation.

Avoid Probate

Perhaps the biggest benefit of putting your real estate property into a trust is to avoid probate . A common misconception with estate planning is that a will enables you to avoid probate, but this is not true. A deceased person’s estate goes into probate, a court process that manages the transfer of assets to beneficiaries. First, the court determines the validity of their will if they made one. In the absence of a will, the probate court decides the distribution of the estate according to state intestacy laws. This process can take up to a year or longer, depending on the complexity of your estate.

The probate process is time-consuming, public, and costly, one that you do not want your loved ones to experience while they are grieving your death. By avoiding probate with a trust, property transfer to beneficiaries occurs swiftly and discreetly, sparing them the ordeal during a challenging period.

Privacy & Efficiency

As a result of avoiding probate, a trust lets you transfer your properties to your beneficiaries faster and in private. This is because all files involved in probate, including your will and inventory of assets, become part of the public record.

Alternatively, with a trust, your successor trustee takes over immediately upon your death. The new trustee will then manage your estate following your wishes without involving the probate court. Thus, your beneficiaries can receive their inheritance faster without the need to release any private information.

Asset Protection

Because the real estate properties under a trust are not technically owned by an individual, they are not subject to any of the individual’s liabilities. For example, if you die, your trust will not be liable for any debts, divorce settlement, or other financial obligations that you may leave behind. Your trust ensures that your beneficiaries will receive their inheritance as you have directed.

Tax Benefits

The estate of a deceased person is subject to estate taxes. When you die, and your real estate properties are in a trust, these properties will not be counted as part of your estate. Thus, your estate will not pay for the tax for these properties. You can further minimize your tax liabilities by tweaking the structure of your trust, distributing among beneficiaries, and adding tax-saving strategies.

Simplicity & Flexibility

Your successor trustee can perform their responsibilities without a hitch as long as you set your terms right. The trick is to be as detailed and clear as possible in your instructions and work with an estate planning attorney who has experience with trust administration . This is crucial because your attorney will provide valuable guidance on how to create a trust that doesn’t run into administration issues.

Furthermore, a trust is a helpful resource in the event of incapacitation, not only after your death. If you are in the hospital due to illness or an accident, your successor trustee can easily step in to manage your real estate, finances, and other assets in your trust. This means you can focus on recovering and have peace of mind that your mortgage is being paid, taxes are being handled, and more. If you only have a will, you would need a financial power of attorney in place for this to happen.

Real Estate Trust FAQs

Who Owns the Real Estate in a Trust?

The title to the property is held by the trust itself. You will retain control, access, and management of the property as the initial trustee during your lifetime. Upon your death, your trust will still own the real estate, and your successor trustee will follow your trust’s instructions to manage, sell, or transfer ownership of the property.

How Do I Put My House in a Trust?

Putting your house in a trust involves several steps, but these can be quite easy with the help of an experienced estate planning attorney.

1. Choose an Estate Planning Attorney: Trusts are complex legal documents that we do not recommend creating without expert guidance. Oftentimes, clients bring us a list of trust terms that needlessly overcomplicate their trust, resulting in a higher potential for litigation and accompanying legal fees during trust administration . To ensure your wishes are honored, work with an estate planning attorney who will find the perfect balance between the terms you want and what works well come trust administration time.
2. Create a Trust: After consulting with your attorney, they will begin drafting your trust. The terms of the trust specify how your property will be held and distributed.
3. Fund the Trust: To receive all the benefits of putting your real estate in a trust, you have to make sure you take the step to fund your trust by transferring ownership of your assets. This typically involves executing a deed that formally transfers the real estate title to the trust.
4. Update Records with Relevant Parties: You should notify companies such as your mortgage lender and home insurance provider of the change in ownership. Your lender may request documentation showing the trust’s ownership of the property and even your successor trustee and beneficiary’s information.

Are There Any Drawbacks to Putting My Real Estate in a Trust?

Some people may say the cost of establishing a trust is a drawback. However, it brings many benefits and peace of mind that we think far outweigh the cost. If you have concerns, it's essential to weigh these considerations carefully and consult with legal and financial professionals to determine the most suitable estate planning strategies for your individual needs and circumstances.

Unlocking Your Estate's Full Potential: The Power of Trusts for Real Estate

As you navigate the intricate landscape of estate planning, one strategy stands out for its versatility and effectiveness: Trusts. Real estate constitutes a significant portion of many individual's estates, making it a crucial asset to protect and manage. By harnessing the power of trusts, you can unlock a myriad of benefits for yourself and your loved ones.

As you contemplate the next steps in your estate planning journey, we invite you to take advantage of our expertise and resources. When it comes to estate planning, you can’t go wrong with seeking professional help. At Rilus Law, we specialize in empowering individuals like you to make informed decisions about their future. Book a free personal family legal session with Rilus Law today to ask your estate planning questions and discover if a trust is the right choice for you. Together, we'll craft a personalized strategy to protect your legacy and provide peace of mind for you and your loved ones.