Should you put your home in a trust?
Why put your home in a trust? Placing your home in a trust can make things easier for your loved ones if you pass away. When your home is in a trust, it transfers directly to your chosen beneficiaries without going through probate. This can save time and money and avoid family disputes. A trust also lets you clearly state your wishes, making sure your home goes to the right person.
If you don’t put your home in a trust, it may go through probate—a legal process to settle your estate—after your passing. As many heirs have experienced, this can be time-consuming and costly. Thankfully, placing your home in a trust is a relatively simple process that may take a few days to weeks.
While placing your home in a trust has multiple benefits, it can also have drawbacks. These include setup and maintenance costs, loss of control over your property (particularly with an irrevocable trust), potential tax implications (depending on the type of trust) and possible impacts on eligibility for government benefits such as Medicaid.
How to put your home in a trust: 7 steps
Quick guide: steps to put your home in a trust
Contact an estate attorney.
Choose a trust type (revocable or irrevocable).
Draft the trust agreement.
Prepare and sign a new deed.
Record the deed.
Update your home insurance.
Review and maintain the trust.
Connect with your local loan officer to review your mortgage and identify opportunities to save.
Here’s a closer look at the process:
1. Contact an estate attorney.
First, consult with an estate attorney. They'll explain your options for putting your home in a trust. Working with an experienced professional provides peace of mind, knowing that your trust has been created legally and correctly. The average cost of a living trust may range from $400 to $3,000.
2. Choose a trust type.
With your attorney’s help, you can decide on a type of trust, which typically falls into two categories:
- A revocable trust lets you stay in control and make changes later.
- An irrevocable trust offers more protection but can’t be easily changed.
A home is often placed in a revocable over an irrevocable trust, though this can depend on individual factors. This is because revocable trusts offer more flexibility and control. It’s easier to modify or even dissolve a revocable trust if you need to, enabling you to switch beneficiaries or adjust if circumstances change.
3. Draft the trust agreement.
The trust agreement is a legal document that explains how the trust works. It names the trustee (the person who will manage the trust), the beneficiaries (the people who receive what is left to them in the trust) and any rules for how your home will be handled. Your attorney will put together this document for you.
4. Prepare and sign a new deed.
After drafting your trust, the next step is to prepare a new deed for your house to:
- Legally transfer ownership of your home from your name to the trust.
- Make sure your property is covered by the terms and protections of the trust agreement.
The new deed is typically prepared by your estate attorney. The deed must include details, like the name of the trust and the trustee. Once the deed is created, you’ll review it for accuracy and sign it in the presence of a notary public. Signing the new deed ensures the trust becomes the official owner of your property, allowing it to be managed according to the terms you’ve set in the trust agreement.
5. Record the deed.
Once you've signed the deed, you'll need to take it to your local county recorder's office. This is a public record that shows the trust is now the legal owner of your home. It's similar to registering a car; recording the new deed makes the transfer of ownership official.
6. Update your home insurance.
Next, let your insurance company know you put your home in a trust and that it’s changed ownership. Provide the trust's name, as it will now be the legal owner of your home. Ask your insurer to list the trust as an additional insured party or as the primary named insured, depending on their requirements. If your home insurance policy isn’t updated, your claims could potentially be denied, or there could be gaps in coverage.
7. Review and maintain the trust.
A trust isn’t something you “set and forget.” Life changes, and your trust might need to change too. Check in and review it every few years with your attorney to make sure it still fits your needs, especially if you buy new property or update your estate plan. Regular maintenance ensures your trust continues to protect your assets and reflects your current wishes.
How does putting your home in a trust affect your mortgage?
If you’re buying a house, Guild Mortgage will allow you to place your home in a trust during the closing process. If you already own your home, placing it in a trust won’t immediately impact your existing mortgage. You’ll continue to make your regular payments, and the loan terms will remain unchanged. Still, it’s important to check in with your loan officer about the property transfer to avoid any potential complications.
Even when your home is in a trust, you can typically still access your home equity. This includes refinancing your mortgage or taking out a home equity loan or line of credit. With a reverse mortgage, or a Flex Payment Mortgage, the process becomes more nuanced. Most lenders allow a home in a trust to qualify for a reverse mortgage as long as the trust terms align with their guidelines. You can ask your loan officer for details.
Have you checked in with your loan officer lately?
Tackling home improvements, funding unexpected expenses, consolidating high-interest debt*, paying for college or starting your own business—these are all examples of what you could do with your home equity. If it’s been a while since you’ve checked in, let’s talk about making your equity work for you.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Guild Mortgage offers home loan financing only. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.
*Please consult your financial advisor on the consolidation of short-term debt into long term debt. By refinancing an existing loan, total finance charges may be higher over the life of the loan.