As a homeowner, you may be looking for a way to spell out exactly how you want your assets divided among your beneficiaries. Perhaps your goal is to avoid a lengthy (or messy) probate process. You’ve heard that establishing a trust could be a solution, but this sounds expensive.
In this post, we’ll examine the cost of putting a house in trust, explain who technically owns the home once it’s in the trust, and review some reasons why you might want to take this step. We’ll also share expert insights from a top attorney.
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What is a trust?
A trust is a legal arrangement in which a third party, known as a trustee, holds and manages assets — like your home — on behalf of a beneficiary. It’s set up under state law and can provide several benefits, such as avoiding probate, which simplifies the process of passing assets to your heirs.
“A trust is essentially a type of agreement,” explains Rajeh A. Saadeh, founding attorney of a major law office in New Jersey. “When it comes to putting a property or any assets into trust, usually this is done for estate planning purposes.”
But a trust is not just for after-death planning.
“Even while you are alive, you may want it to be governed by a certain set of rules. It will dictate what is to be done to the property, when, and why. After you pass on, the trust can dictate who takes over and to what extent the rules may change,” Saadeh says.
What is a trustee?
Saadeh explains that the trustee acts as an authorized custodian for the assets in your trust and is responsible for managing them according to the rules you create when establishing the trust. You can also name yourself a trustee until you can no longer fill the role.
Who owns a home when it’s placed in a trust?
Once a house is placed in a trust, the legal title of the property is transferred to the trust itself. The trustee you appoint then becomes responsible for managing the property according to the terms of the trust, which you dictate.
“They are not operating under their own individual interests or for their own benefit,” Saadeh says. “They have to operate in accordance with the terms of the trust. It’s still in the name of those individuals, but it’s as a trustee of the trust.”
So technically, the trustee owns the legal title, but the beneficiaries you name hold the beneficial interest in the trust’s assets.
Why put a house in trust?
Putting a house in a trust offers several advantages:
- Avoid probate: The property can be passed directly to your beneficiaries without the costly and time-consuming process of probate court.
- Privacy protection: Unlike a will, which becomes public record, a trust can offer privacy regarding the details of your estate.
- Control over assets: You can specify terms for how and when your heirs receive their inheritance, which can help protect the estate from creditors and legal judgments.
- Ease of transition: A trust can provide a seamless transfer of ownership and management without the disruption typically associated with the death of a property owner.
- Less delay for beneficiaries: Your heirs can take possession of the property more quickly, bypassing the often lengthy probate process.
- Simpler transition: Managing estate affairs can be less stressful during an emotional time, easing the burden on your loved ones.
- Estate tax advantages: An irrevocable trust may help reduce estate tax liability, potentially saving money for large estates.
- Peace of mind: Knowing that your property will be handled according to your wishes can provide significant comfort and security.
How much does it cost to put a house in a trust?
The cost of putting a house in a trust typically ranges from $1,000 to $3,000, but this can vary based on several factors. For wealthier individuals with more complex estates, the price can escalate to between $5,000 and $8,000.
“It can be simple; it can be not so simple,” Saadeh says. “There are going to be attorney fee costs to prepare the deed and other documents that come with it.”
The final cost to put a house in a trust depends on various aspects:
- Complexity of the trust: More detailed trusts with specific stipulations require more legal work, increasing costs.
- Marital status: Joint trusts for married couples may involve more complexities than single trusts.
- Where your assets reside: Diverse asset locations can complicate the trust creation process.
- The state you live in: Legal fees and requirements vary significantly between states.
- Attorney time and expertise: Experienced attorneys typically charge higher rates.
- Filing and document fees: These administrative costs can add up, especially in jurisdictions with higher fees.
- Asset transfer fees: Transferring titles and other assets into the trust incurs additional costs.
Creating your own trust
For those considering a more hands-on approach, online services like LegalZoom, FreeWill, and Trust&Will offer do-it-yourself options for creating a living trust. While these can be cost-effective, they might not be suitable for everyone, especially if your estate planning needs are complex. Improperly drafted trusts can lead to significant issues down
Disadvantages of putting a house in trust
While there are numerous benefits to placing your house in a trust, there are also some potential drawbacks to consider:
- Cost: Setting up a trust can be expensive, particularly if your estate is large or complex.
- Maintenance: Trusts require ongoing management, which can be burdensome for some trustees.
- Loss of control: Once a house is placed in an irrevocable trust, you no longer own it and can’t make decisions regarding the property without the beneficiary’s consent.
- Complexity in borrowing: Getting a mortgage or refinancing can be more complicated for properties held in a trust.
- Probate may still be required: Your home may not be your only asset. To fully avoid probate, you will need to move all of your assets into the trust.
Saadeh cautions that while the benefits can be helpful, there are situations where placing a house in a trust might not be advisable. He explains that the trust can take away some of the benefits homeowners have, provided that they use the home as their principal residence.
“For example, the capital gains tax,” he says. “If you sell the house and make a $100,000 gain, if it’s in a trust, that $100,000 is probably taxable. But if it’s a primary residence where the sellers reside and they own the property — they’re human beings, they’re not a trust, they’re not companies. In that situation, for the homeowner who lives in it, that $100,000 may not be taxable to them.”
Saadeh shares another example: “When you are a trustee, you have to operate for the best interest and with a responsibility toward the beneficiaries of the trust. But if you’re the property owner, it’s in your name alone. You can do what you want with your property — as long as there’s not something illegal.”
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How to put your house in a trust
Putting your house in a trust involves several key steps:
- Choose the type of trust: Decide whether a revocable or irrevocable trust best suits your needs. (We’ll explain the different types of trusts in a minute.)
- Select a trustee: Choose who will manage the trust. This can be yourself, a trusted family member, or a professional trustee.
- Draft the trust document: This is where you specify the terms of the trust, including who the beneficiaries will be and how the trust assets are to be managed.
- Hire an attorney: Consult with an estate planning attorney to ensure all legal aspects of the trust are handled correctly.
- Title transfer: Officially transfer the title of your house to the trust. This step typically requires filing a deed with your local county’s recorder’s office.
- Notify interested parties: Inform your mortgage lender and insurance company that the property has been placed in a trust.
- Maintain the trust: Regularly review and manage the trust to ensure it continues to meet your goals and complies with any legal changes.
Pro tip: Depending on your circumstances, you could use an online service to create your trust, and then pay an attorney to review it for accuracy.
FAQs about putting a house in trust
Are there different types of trusts?
Yes, there are several types of trusts, each designed for specific purposes and situations. Key types include:
- Living trusts: Established during your lifetime to manage your assets and potentially bypass probate.
- Testamentary trusts: Created as part of a will and activated upon the trustor’s death.
- Revocable trusts: Can be altered or terminated by the trustor during their lifetime.
- Irrevocable trusts: Cannot be modified or revoked once established, offering benefits like asset protection and tax advantages.
Can you sell a house in a trust?
Yes, a house in a trust can be sold, but the process differs from a regular sale. The trustee, who holds legal title to the property, must manage the sale in accordance with the terms of the trust. The proceeds from the sale then become part of the trust’s assets and are managed for the benefit of the beneficiaries.
“The trust will be considered an asset, and when you sell an asset, there may be [capital] gains… how much was realized from the sale of the property,” Saadeh says. “If the property was purchased for $300,000, and sold for $400,000, that means $100,000 was made. There may be taxes on that $100,000. These questions [should be] fleshed out with an accountant.”
Does a trust help avoid paying taxes?
In some cases, a trust may be able to help you shield assets from certain taxes. For instance, an irrevocable trust may help avoid estate taxes by legally removing assets from the trustor’s taxable estate. However, trusts are subject to their own tax rules and rates, which can be complex. The IRS cautions that: “The transfer of assets to a trust will give the donor no additional tax benefit. Taxes must be paid on the income or assets held in trust, including the income generated by property held in trust.
To understand the specific tax implications, it is essential to consult with a tax advisor or attorney who specializes in estate planning.
What assets can go into a living trust?
A living trust can hold a wide variety of assets, including:
- Real estate: Properties owned by the trustor can be transferred into the trust.
- Bank accounts: Checking and savings accounts can be managed through the trust.
- Financial investments: Stocks, bonds, mutual funds, and other investment accounts.
- Insurance policies: Life insurance policies can be included, potentially helping to manage proceeds and beneficiaries.
- Tangible property: Art, jewelry, and other valuable personal items can also be part of a trust.
What factors affect the cost of setting up a trust?
Several factors can influence how much it costs to set up a trust. These include:
- Type of Trust: Revocable trusts are usually simpler and cheaper than irrevocable trusts.
- Attorney Fees: Legal costs can vary widely based on the attorney’s experience and your location.
- Estate Complexity: If you have multiple properties, business interests, or unique assets, expect higher costs.
- State and Local Fees: Some states, like California, have higher legal fees and recording costs.
- Customization Needs: A simple, template-based trust costs less than a highly customized one built for complex family or financial situations.
Are there ongoing costs after the trust is created?
Yes, there are usually ongoing costs to maintain and update your trust, such as:
- Amendments: Life changes like marriage, divorce, births, or deaths may require trust updates, which usually cost a few hundred dollars each.
- Trust Administration: After you pass away, your trustee may need legal help to administer the trust, which could involve legal or accounting fees.
- Property Transfers: If you buy new property later, you’ll need to update the trust, sometimes incurring additional recording or legal fees.
While creating a trust is often a one-time expense, it’s smart to budget for these occasional costs to keep your trust up-to-date and effective.
Should I set up a trust myself or hire an attorney?
You have two main options when setting up a trust: DIY or hiring an attorney.
| Option | Pros | Cons |
| DIY Trust | Lower cost (as low as $100 with online software) | Risk of errors, may not be legally valid in all cases |
| Hire an Attorney | Professional expertise, customized to your needs | Higher upfront cost (typically $1,000–$3,000) |
If your situation is simple and you’re confident using legal software, a DIY trust might be enough. But if you own valuable assets, real estate in multiple states, or want to avoid future legal headaches, it’s usually safer to hire a qualified estate planning attorney.
Bottom line: Cost to put a house in a trust
The cost of putting your house in a trust can vary widely based on factors like the complexity of your estate and the specific requirements of your state. Generally, you can expect to pay between $1,000 and $3,000 for most trusts, though more complex situations may require additional investment.
While setting up a trust involves upfront costs, the potential benefits — such as avoiding probate, reducing estate taxes, and maintaining control over asset distribution — can far outweigh these initial expenses.
If you’re considering selling a home that’s currently in a trust, finding the right real estate agent is crucial. HomeLight’s Agent Match can connect you with experienced agents who specialize in handling such unique situations, ensuring a smooth and successful sale.
Editor’s note: This post is for educational purposes only, not legal advice. If you need assistance with estate planning, HomeLight encourages you to contact your own advisor.
Header Image Source: (iriana88w / Deposit Photos)
Pro tip: Depending on your circumstances, you could use an online service to create your trust, and then pay an attorney to review it for accuracy.
FAQs about putting a house in trust
Are there different types of trusts?
Yes, there are several types of trusts, each designed for specific purposes and situations. Key types include:
- Living trusts: Established during your lifetime to manage your assets and potentially bypass probate.
- Testamentary trusts: Created as part of a will and activated upon the trustor’s death.
- Revocable trusts: Can be altered or terminated by the trustor during their lifetime.
- Irrevocable trusts: Cannot be modified or revoked once established, offering benefits like asset protection and tax advantages.
Can you sell a house in a trust?
Yes, a house in a trust can be sold, but the process differs from a regular sale. The trustee, who holds legal title to the property, must manage the sale in accordance with the terms of the trust. The proceeds from the sale then become part of the trust’s assets and are managed for the benefit of the beneficiaries.
“The trust will be considered an asset, and when you sell an asset, there may be [capital] gains… how much was realized from the sale of the property,” Saadeh says. “If the property was purchased for $300,000, and sold for $400,000, that means $100,000 was made. There may be taxes on that $100,000. These questions [should be] fleshed out with an accountant.”
Does a trust help avoid paying taxes?
In some cases, a trust may be able to help you shield assets from certain taxes. For instance, an irrevocable trust may help avoid estate taxes by legally removing assets from the trustor’s taxable estate. However, trusts are subject to their own tax rules and rates, which can be complex. The IRS cautions that: “The transfer of assets to a trust will give the donor no additional tax benefit. Taxes must be paid on the income or assets held in trust, including the income generated by property held in trust.
To understand the specific tax implications, it is essential to consult with a tax advisor or attorney who specializes in estate planning.
What assets can go into a living trust?
A living trust can hold a wide variety of assets, including:
- Real estate: Properties owned by the trustor can be transferred into the trust.
- Bank accounts: Checking and savings accounts can be managed through the trust.
- Financial investments: Stocks, bonds, mutual funds, and other investment accounts.
- Insurance policies: Life insurance policies can be included, potentially helping to manage proceeds and beneficiaries.
- Tangible property: Art, jewelry, and other valuable personal items can also be part of a trust.
Bottom line: Cost to put a house in a trust
The cost of putting your house in a trust can vary widely based on factors like the complexity of your estate and the specific requirements of your state. Generally, you can expect to pay between $1,000 and $3,000 for most trusts, though more complex situations may require additional investment.
While setting up a trust involves upfront costs, the potential benefits — such as avoiding probate, reducing estate taxes, and maintaining control over asset distribution — can far outweigh these initial expenses.
If you’re considering selling a home that’s currently in a trust, finding the right real estate agent is crucial. HomeLight’s Agent Match can connect you with experienced agents who specialize in handling such unique situations, ensuring a smooth and successful sale.
Header Image Source: (iriana88w / Deposit Photos)
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