Should Your Home Be in a Trust?

Key Points

Whether a home should be placed in a trust depends on the owner's goals and overall estate plan.
Many revocable living trusts are designed to own a person's residence.
Transferring a home into a trust is often part of funding the trust.
A home held in a revocable living trust may avoid probate if properly titled.
Placing a home in a trust is not appropriate in every situation.

Introduction

For many families, the home is their largest financial asset and often carries significant sentimental value. It's no surprise that one of the most common estate planning questions is whether the home should be transferred into a trust. The answer depends on the owner's goals, the type of trust being used, and the overall estate plan.

Why People Transfer a Home to a Trust

A revocable living trust may simplify administration after death, allow a successor trustee to manage the property during incapacity, help avoid probate for a properly titled residence, and provide greater privacy than a probate proceeding.

When a Home May Not Belong in a Trust

Not every homeowner benefits from placing a residence into a trust. Some individuals have simple estates where probate avoidance is not a primary concern. Others may achieve their goals through tools such as a Lady Bird Deed, where available, or other estate planning strategies.

What Happens to the Mortgage and Insurance?

In many situations, transferring a residence to a revocable living trust does not require paying off an existing mortgage, although owners should notify their insurance carrier and verify that homeowner's insurance remains appropriate. Lenders, title companies, and insurance professionals may have documentation requirements.

Funding Matters

Simply signing a trust agreement does not place a home into the trust. A properly prepared and recorded deed is generally required to transfer ownership.

Potential Drawbacks

A trust is not free to create or maintain. Property transfers should be completed correctly, and mistakes in funding can defeat many of the expected benefits.

What About Vacation Homes and Family Cottages?

Vacation homes and family cottages often present unique planning challenges because several generations may wish to continue sharing the property. A specialized cottage trust can establish rules for scheduling, maintenance, expenses, improvements, buy-out rights, dispute resolution, and long-term succession.

Are There Alternatives to Putting My Home in a Trust?

A revocable living trust is not the only tool that may help transfer a home outside probate. In Michigan, an Enhanced Life Estate Deed—commonly called a Lady Bird Deed—may allow an owner to retain full control of the property during life while providing for an automatic transfer to designated beneficiaries at death.

Depending on your circumstances, a Lady Bird Deed, a revocable living trust, or a combination of both may be appropriate. An estate planning attorney can help determine which approach best fits your goals.

Common Misconceptions

Putting my home in a trust means I no longer own it.

Not necessarily. With a revocable living trust, most people continue to own, live in, buy, sell, refinance, and manage their home just as they did before. The trust changes how title is held, not your day-to-day control of the property.

Every homeowner should use a trust.

Not necessarily. A revocable living trust is an excellent planning tool for many homeowners, but it is not the right solution for everyone. Depending on your goals, a will, a Lady Bird Deed, or another estate planning strategy may better accomplish your objectives.

Signing the trust automatically transfers my home.

No. Creating a trust does not, by itself, change ownership of your home. To place your home in the trust, a properly prepared and recorded deed is generally required. Without that transfer, the home may not receive the benefits the trust was intended to provide.

Frequently Asked Questions

Can I sell my home after placing it in a revocable trust?

Generally, yes. Most people who serve as trustee of their own revocable living trust can buy, sell, or otherwise transfer their home without giving up control. The sale is typically handled much like any other real estate transaction.

Can I refinance my home if it is in a trust?

Often, yes. Many lenders routinely finance homes held in revocable living trusts, although they may require temporary paperwork or ask that title be handled in a particular way during the loan process.

Will placing my home in a trust reduce my property taxes?

Not by itself. Simply transferring your home to a revocable living trust generally does not reduce your property taxes. However, because tax rules vary by state and individual circumstances, you should consult an estate planning attorney or tax professional regarding your specific situation.

Is a trust the only way to avoid probate for my home?

No. Depending on your state and your planning goals, other estate planning tools—such as a Lady Bird Deed in Michigan—may also allow your home to pass outside of probate. The best approach depends on your overall estate plan and personal circumstances.

Should I use both a trust and a Lady Bird Deed?

Sometimes. The appropriate approach depends on your objectives and the rest of your estate plan.

Is a cottage trust different from a revocable living trust?

Usually, yes. A cottage trust is typically designed to address the unique issues involved with long-term family ownership of vacation property.

Your Next Step

Your home is often just one of many assets that should be coordinated with your estate plan. Even the best-drafted trust cannot accomplish its intended purpose if important assets are never transferred into it.

In the next article, you'll learn about funding a trust—the process of transferring ownership of appropriate assets into your trust. Proper funding is one of the most overlooked aspects of estate planning, yet it is essential to ensuring your trust works as intended.

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About Jarrod Barron Law

Jarrod Barron Law helps Michigan individuals, families, and business owners make informed legal decisions through thoughtful, plain-English estate planning.

Disclaimer

This article is provided for general educational purposes only. It is not legal advice and does not create an attorney-client relationship.