A Practical Guide: The Steps to Putting Your Home in a Trust
If you’ve weighed the pros and cons and are leaning toward using a trust, it’s helpful to understand the practical steps involved. This is a process that should be guided by a qualified attorney to ensure it is done correctly.
Step 1: Create the Trust Document
The first step is to work with an estate planning attorney to draft the trust agreement. This is a detailed legal document that serves as the rulebook for your trust. It will formally name you as the Grantor and initial Trustee. Most importantly, it will name your Successor Trustee(s) and your Beneficiaries. This document will also outline your wishes for how the assets should be managed and distributed, both during your incapacity and after your death.
During this process, you’ll have important conversations with your attorney about who is best suited to be your successor trustee and how you want your assets, including your home, to be handled for your heirs. This is your opportunity to build in any special protections or instructions you desire.
Step 2: Fund the Trust by Transferring Your Home’s Title
This is, without a doubt, the most important and most frequently missed step in the process. A trust is nothing more than an empty legal shell until you put assets into it. The process of transferring assets into your trust is called “funding the trust.”
For your house, funding means changing the legal title of the property from your individual name to the name of your trust. For example, if you are Jane Doe, the title would be changed from “Jane Doe” to “Jane Doe, Trustee of the Jane Doe Revocable Living Trust dated [Date].”
This is accomplished by having your attorney prepare a new deed. You will sign this deed in front of a notary, and then it must be recorded with the county recorder’s office where your property is located. Once the new deed is recorded, your trust is now the official owner of your home, and you have successfully set it up to avoid probate.
Addressing Common Concerns During the Transfer
People often have a few key questions about this transfer process:
What about my mortgage?
This is a common worry. Homeowners are often concerned that transferring their property to a trust might trigger a “due-on-sale” clause in their mortgage, forcing them to pay off the entire loan immediately. Fortunately, a federal law called the Garn-St. Germain Depository Institutions Act of 1982 specifically prevents this from happening. The law prohibits lenders from accelerating the loan when you transfer your property into a revocable living trust in which you are the beneficiary. It is still a good practice to notify your mortgage lender that you have completed the transfer.
Will this affect my property taxes?
In most jurisdictions, transferring your primary residence into a revocable living trust will not trigger a reassessment of your property taxes or affect your homestead exemption, because you are still considered the owner for tax purposes. However, laws can vary by state and even by county, so it is crucial to confirm this with your attorney or local tax assessor’s office.
What about my homeowner’s insurance?
You must contact your homeowner’s insurance agent to notify them of the change in title. You will likely need to add the trust as an “additional insured” on your policy to ensure your coverage remains uninterrupted. Failing to do this could create a dangerous gap in your liability or property coverage.
Completing these steps ensures that your trust is not just a piece of paper in a drawer, but a powerful tool that is ready to work for you and your family when it’s needed most.
