Is Putting a Home in Trust a Good Estate Planning Move?

It is common to put a home in a trust. It is typical in the estate planing process to consider what to do with a home, and there are several options. It’s common for a large estate to also include a vacation home, or family retreat.

Estate plans that include a revocable trust often will fund the trust by a pour-over will, says Kiplinger’s recent article entitled “Should You Own Your Home in Your Trust?” A settlor (the person establishing a trust) often will title their home to the revocable trust, which becomes irrevocable at death. Or it is also common for couples with a home subject to a mortgage to keep title in their names during their lives and then transfer title of their home to a trust when they die.

Another option is a Qualified Personal Residence Trust, which is irrevocable, to gift a valuable home to a trust for the settlor’s children. With a QPRT, the house is passed over a term of years while the original owner continues to live there, so the gift passes with little or no gift or estate tax.

The most relevant considerations for homeownership in a trust are:

  • The competing needs of other trust beneficiaries
  • The purchase price and costs of maintaining the home
  • The size of the trust as compared to those costs
  • Other sources of income and resources available to the beneficiary; and
  • The interests of the remaindermen (beneficiaries who will take from the trust when the current beneficiaries’ interests terminate).

The terms of the trust may require the trustee to ignore some of these considerations. Each situation requires a number of decisions.

Those who want to create a trust should work with an experienced estate planning attorney to avoid any issues. If you live in the Madison, Wisconsin area, schedule a call with Rick Coad to discuss your estate planning needs.

Reference: Kiplinger (Feb. 8, 2022) “Should You Own Your Home in Your Trust?”

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