When it comes to estate planning, one common question is whether you can move your house under a trust after purchasing it. The answer is yes, and doing so can offer several benefits, including asset protection and avoiding probate. Here, we explore the process and considerations of transferring your home into a trust.
Understanding trusts and their benefits
A trust is a legal arrangement in which one party, the trustee, holds and manages assets for the benefit of another party, the beneficiary. Trusts are a key component of estate planning, offering benefits such as asset protection, privacy and probate avoidance. By placing your home in a trust, you can ensure it is managed according to your wishes and passed on to your beneficiaries without a lengthy probate process.
The process of moving your home into a trust
Transferring your home into a trust generally involves the following steps:
- Create the Trust: The first step is to create the trust document. This legal document outlines the terms of the trust, including the trustee, beneficiaries, and how the trustee manages the assets. You can create a trust with the help of an estate planning attorney to ensure it meets all legal requirements.
- Transfer the deed: Once you create the trust, you need to transfer the deed of your home into the trust. This process involves drafting a new deed that names the trust as the property owner. The deed must be signed, notarized and recorded with the local land registry office.
- Notify the mortgage lender: If you mortgaged your home, you must notify your lender of the transfer. Under the Garn-St. Germain Depository Institutions Act, lenders cannot enforce a due-on-sale clause when transferring property into a revocable living trust, provided the borrower remains a beneficiary.
- Update insurance policies: Ensure that your homeowner’s insurance policy reflects your trust as the property owner. This step is crucial to maintaining coverage and protecting your assets.
Depending on details specific to the trust, other steps may be necessary.
Common strategic considerations and tips
When transferring your home into a trust, there are several important considerations to weigh:
- Consult with professionals: Working with an estate planning attorney and a real estate lawyer can help you navigate the legal complexities and ensure the transfer is legal.
- Understand tax implications: Transferring property into a trust can have tax implications. Consult a tax advisor to understand how the transfer may affect your tax situation.
- Maintain good records: Keep detailed records of the transfer process, including copies of the trust document, the new deed, and any correspondence with your mortgage lender and insurance company.
An estate law attorney drafting the trust may provide additional guidance for other important considerations.
Taking care of the beneficiaries
Moving your house under a trust after purchasing it is a strategic move in estate planning. By following the proper steps and consulting with professionals, you can ensure that the trustee manages your home according to your wishes and smoothly passes it to your beneficiaries.