Trying to decide on the best way to pass on your home to your children? It often comes down to leaving your home in a will or putting it in a trust. Estate planners typically recommend using a trust to avoid probate and provide more control over how and when your loved ones receive the property.
A properly structured trust:
- Avoids the probate process entirely
- Keeps your affairs and asset transfers private
- Allows you to set conditions for inheritance
- Can protect assets from creditors or divorce
- May reduce estate taxes depending on structure
In contrast, a will sends your property through probate—a time-consuming, costly, and public court process that can delay your children’s access to their inheritance for months or even years.
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How to Put Your Home in a Trust: 6 Steps
Before transferring your home into a trust, it’s important to consult with an estate attorney. They can evaluate whether a trust is right for your situation by weighing the potential drawbacks against the benefits.
On the positive side, a trust typically allows your heirs to avoid the probate process, may provide tax advantages depending on your situation, and offers privacy that a will does not.* The downsides include upfront costs to establish the trust and ongoing maintenance requirements.
Even though most mortgages have a “due on sale” clause that would normally require full payment when ownership changes, federal law protects homeowners who want to transfer their primary residence into a trust. You can read more about this here. Your estate attorney can also walk you through this process.
Once you decide that a trust is right for you, there are several steps to set it up:
1. Choose the type of trust
Talk with your estate attorney about which trust best fits your situation. A revocable living trust lets you keep control of your assets but offers fewer tax advantages and less asset protection. An irrevocable trust provides stronger protection and potential tax benefits but requires giving up more control. Many people choose revocable trusts for their flexibility.
2. Create the trust document
Your attorney will draft the legal document that sets up your trust. It will name the trustee (person who manages the trust), the beneficiaries (those who receive the assets), and how and when assets should be distributed. This document should follow state laws and include backup plans in case a trustee can’t serve.
3. Fund the trust by transferring your property
To make the trust work, you need to move assets into it. This typically involves preparing a deed (often a quitclaim or warranty deed) that transfers the property from you as an individual to you as the trustee of your trust. You’ll also need to update titles for other major assets, like bank and investment accounts, so they’re owned by the trust.
4. Record the new deed
File the updated deed with your local county recorder’s office. This makes the trust the official owner of the property. You may need to complete additional forms, such as a property transfer affidavit or tax exemption form, and pay recording fees, which vary by location.
5. Update your homeowners insurance
Contact your insurance company to update your homeowners policy to reflect the trust as the new owner of your home. This ensures your coverage remains valid and prevents any issues if you need to file a claim in the future. Your insurer might request a copy of the trust document or a certificate of trust to confirm ownership.
6. Maintain your trust
Once your trust is set up, you’ll need to keep it updated. If you buy new assets, make sure they’re titled in the trust’s name. Review the trust every few years with your attorney to make sure it remains up to date as laws and personal circumstances change.
Have Questions About Putting Your Home in a Trust?
We’re here to help. Contact your Cornerstone loan officer if you’d like a referral to a local estate attorney.
*Sources deemed reliable but not guaranteed. For educational purposes only. Cornerstone Home Lending does not provide tax advisory services. Please contact a qualified professional for specific guidance.