Putting Your House Into A Trust
The Pros And Cons Explained
Living Trust Frequently Asked Questions
In this article, we’re going to cover some of the pros and cons of putting your house into a Trust. Additionally, we’re going to answer some common questions about how to put your house into a Trust, who owns your house after it’s in a Living Trust, and what you can and can’t do with your property.
Advantages Of Putting Your House Into A Trust
The biggest advantage of putting a house in a Trust is that, unlike a Last Will and Testament, a Living Trust allows you to avoid Probate Court. There are three main reasons why this is important.
First, Probate can be very expensive.
Probate is the legal process through which the court ensures that, when you die, your debts are paid and your assets are distributed according to Michigan law.
Legal fees, executor fees, inventory fees (county taxes), and other costs have to be paid before your assets can be fully distributed to your heirs.
If you own property in other states, your family could face multiple Probates, each one according to the laws in that state.
We usually expect about 10% of your Estate to be eaten up in Probate court through legal fees, inventory fees, court costs etc.
For smaller estates, the percentage can be much larger – sometimes leaving little behind for your loved ones.
These costs can vary widely, but we’ve had clients who had to pay tens of thousands of dollars throughout the Probate process.
In general, Probate is much, much more expensive than doing some simple Estate Planning in advance.
Second, Probate can take a long time.
In Michigan, the standard probate process takes a minimum of 5 months to complete.
However, over the past decade we’ve experienced that it generally takes 9 months to a year to resolve simple cases (and several years for contested cases).
We once represented a client whose Probate lasted for 8 years!
Third, Probate is public.
Your family has no privacy.
Probate is a public process, so anyone can see the size of your estate (often what you actually owned), who you owed debts to, who will receive your assets, and when they will receive them.
The process invites upset heirs to contest your Will and can expose your family to greedy creditors and potential fraudsters.
Keep Your Financial Matter Private
Since there is no Probate Court process when you have a Living Trust, there is no need to make your assets public.
On the other hand, if you’re house is only included in a Will, the Will’s contents are made public when it is entered in Probate Court.
Since the Trust avoids Probate, the contents of the transfer stay private.
In fact, in general, the only people who will ever see the Trust, are the beneficiaries that you name.
And even then, only after you pass.
If you become incapacitated during your life, then a Living Trust can protect your family from undergoing a conservatorship.
A conservatorship is when a court-appointed guardian is given the authority to manage an incapacitated person’s financial matters for them.
This feature of a Trust is especially comforting to families in times of difficulty since they do not have to worry about going to court and requesting access to the incapacitated person’s finances.
A Trust gives the family one less problem to face when someone becomes incapacitated.
If the Trust is set up as an individual Trust, then the Trustee can take over and manage the assets.
If the Trust is owned by a married couple, then the second spouse will step in as the acting Trustee.
It is also prudent to have a Durable Power of Attorney for Finances in addition to a Living Trust to grant the new acting Trustee the power to manage any property and finances outside of the Trust.
Disadvantages Of Putting Your House Into A Trust
While the benefits of putting your house into a Living Trust greatly outweigh the drawbacks, it does have some additional complexities…
In order to make your Living Trust effective, you need to make sure that the ownership of your house is legally transferred to you as the Trustee.
Since your house has a title, you need to change the title to show that the property is now owned by the Trust.
To do this you need to prepare and sign a new deed to transfer ownership to you as trustee of the Trust.
In the end, a little bit of additional paperwork and record keeping is worth much more than the time and money that will be lost in Probate, not to mention the stress that your family will have to go through to access your assets after you pass.
Accurate Record Keeping
Once you create a Living Trust you don’t need separate income tax records if you are both the Grantor and the Trustee.
Any income you receive from property that you are holding in the Trust will simply be reported on your personal tax returns.
However, if you transfer property in or out of the Trust, you need to keep accurate written records.
This isn’t difficult, but it’s easy to forget if it has been a few years since you created your Trust.
The advantages of putting a house into a Trust far outweigh the disadvantages. This is why it is one of the best, simplest, and most commonly used methods for avoiding financial disaster and your passing assets to your loved ones after you’re gone.
Now that we have talked about some of the major pros and cons, we are going to answer some additional questions we get from clients about how to put your house into a Trust.
One of the main questions we get is…
Is It Hard To Transfer My House Into A Living Trust?
It’s actually quite simple and your Trust Attorney or financial planner can help. Since your house has a title, you need to change the title to show that the property is now owned by the Trust. To do this you need to prepare and sign a new deed to transfer ownership to you as trustee of the Trust.
Are There Other Assets I Should Consider Transferring Into A Trust?
You should consider transferring any other asset that has a title: stocks, CDs, bank accounts, insurance and most investment accounts. Most Living Trusts also include jewelry, clothes, art, furniture and other assets that do not have titles. If you use the help of a Living Trust Lawyer, they will take care of this for you. Here at Rochester Law Center, we usually use a one page “assignment”. Some beneficiary designations may also be changed to your Trust (for example, insurance policies. IRA, 401(k), etc. can be exceptions).
Will I Lose Control Of My House If It Is In A Trust?
Not at all, you keep full control of all of the assets in your Trust. As Trustee of your Trust, you can do anything you could do before – buy and sell assets, gift them away, mortgage them out, and you can still change or even cancel your Trust altogether. That’s why it’s called a Revocable Living Trust. You even file the same tax return. Nothing changes but the name on the titles.
How Do I Set Up A Living Trust?
If you’d like to set up a Living Trust, it is usually best to consult with an experienced Trust Attorney.
Over the past decade, we’ve helped 1,000s of clients set up all manners of Living Trusts, Wills, Powers of Attorney, and Estate Plans, and we’d be happy to answer any questions you have about Living Trusts.
Just give us a call at (248) 613-0007 to schedule your complimentary consultation.
We’d be happy to answer any questions you have about Living Trusts. To schedule your complimentary initial consultation with an experienced Living Trust Attorney, just give us a call at (248) 613-0007 today!
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Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Chris Atallah is a licensed Michigan Attorney and the author of “The Ultimate Guide to Wills & Trusts – Estate Planning for Michigan Families”. Over that past decade, Chris has helped 1,000s of Michigan families and businesses secure their futures in all matters of Wills, Trusts, and Estate Planning. He has taught dozens of seminars across the State of Michigan on such topics as avoiding the death tax, protecting minor children after the parents’ death, and preserving family wealth from the courts and accidental disinheritance. If you have any questions, Chris would be happy to answer them for you – just call at 248-613-0007.