The Advantages of a House in a Living Trust

By Stephanie Kurose, J.D.

The Advantages of a House in a Living Trust

By Stephanie Kurose, J.D.

A living trust is an estate planning tool that you can use to ensure care for your loved ones after you pass away. Essentially, it's a legal document that allows the creator, or grantor, to transfer ownership of almost any asset—including a house—into the trust, which is then managed by a trustee on behalf of any designated beneficiary. There are certain advantages of putting real estate into a living trust, including avoidance of probate and estate tax, and title protection.

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Living Trust Basics

Similar to a will, a living trust is a legal document that provides distribution of a person's assets upon their death. While a grantor is still living, he also often acts as the trustee to manage the trust as he wishes rather than go through a third person. In this case, the grantor would name a successor trustee to take on the management role after the grantor dies.

A grantor creates a living trust that is either revocable or irrevocable. If it's revocable, the grantor can amend or terminate the trust at any point while still living. Once the grantor dies, the trust becomes irrevocable and cannot be changed.

If the trust is irrevocable, this means the grantor can't change the signed agreement.

Advantages of Placing a House in a Living Trust

There are many advantages of putting important assets, such as a home, into a living trust.

It avoids probate and estate taxes.

Probate is a court process of settling a person's estate. It often takes months to complete and can get costly. However, if a grantor places an asset in a living trust, it's not considered part of the person's estate and therefore does not have to go through the probate process. Instead, the grantor can specify in the trust deed that the trustee is to transfer title of the house to the designated beneficiary when he dies. In that case, the beneficiary is able to obtain title to the house almost immediately without having to go through any court process.

The estate tax represents the total value of property owned by the deceased. Because a house placed in a living trust is not considered part of a person's estate, it's not included when calculating the amount owed in estate tax.

It can protect the title to your house.

In the event you go bankrupt or someone sues you for outstanding debt, creditors may place a lien on your house. This encumbrance could prevent the house from being sold. However, transferring ownership of the house to a trust makes it much harder for creditors to do this. Because the trust owns the house, creditors can only place a lien against a beneficiary's interest in the trust, which is not ideal but still allows you to sell the house without any encumbrance.

Interested in placing your home in a living trust? Contact an online service provider today.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.