Should You Put Your House in a Trust to Avoid Probate?

Frequently Asked Questions (FAQs)

Here are answers to some of the most common questions people have about putting their house in a trust.

1. Can I still sell my house if it’s in a revocable living trust?

   Yes, absolutely. As the trustee of your own revocable living trust, you retain full and complete control. You can sell, mortgage, or give away the property just as you could when it was in your individual name. The only difference is that when you sign the sale documents, you will sign as “Jane Doe, Trustee” instead of just “Jane Doe.”

2. Will a living trust help me avoid estate taxes?

   For the vast majority of people, the answer is no. A standard revocable living trust does not, by itself, reduce estate taxes. For federal estate tax purposes, the assets in your revocable trust are still considered part of your taxable estate. However, the federal estate tax exemption is very high (several million dollars per person), so most estates do not owe any federal estate tax. Some states have their own estate or inheritance taxes with lower exemptions. For very wealthy individuals, more complex types of trusts can be used for tax planning, but this is a specialized area that requires expert advice.

3. What happens if I refinance my house after it’s in the trust?

   This is a routine administrative task. Some mortgage lenders will require you to temporarily transfer the title of the house from the trust back into your individual name to complete the refinancing process. Once the new loan is finalized, a new deed is immediately prepared and recorded to transfer the property right back into the trust. Your estate planning attorney can typically handle this process for a small fee.

4. Is a living trust better than a will?

   They are different tools that serve different primary purposes. A will is essentially a set of instructions for the probate court. A trust is designed to avoid the probate court altogether. Most comprehensive estate plans actually include both. You will still have a special type of will called a “pour-over will” that acts as a safety net. It is designed to “catch” any assets you may have forgotten to put in your trust and “pour” them into it after your death (though these assets will still have to go through probate).

5. My spouse and I own our home jointly. Do we still need a trust?

   Joint ownership (with right of survivorship) is a simple way to avoid probate at the death of the first spouse. The surviving spouse automatically becomes the sole owner. However, it does not solve the problem for what happens when the second spouse dies. At that point, the house would be subject to probate. A trust, on the other hand, plans for both scenarios and what happens after you are both gone, providing a much more comprehensive solution.

6. How much does it cost to set up a living trust?

   The cost varies significantly based on your location and the complexity of your estate. A simple trust-based estate plan prepared by a qualified attorney can range from $2,000 to $5,000 or more. While this is more than the cost of a simple will, it is important to compare this one-time cost to the potential costs of probate, which can often run 3% to 8% of the value of the probated assets. In many cases, the trust pays for itself by saving your family significant money and time down the road.

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