You probably have begun estate planning on your own and are asking yourself, should I transfer real estate into a trust? What can be the advantages and disadvantages of doing this? Of course, funding assets into a trust has so many advantages. Due to how complex trusts are, this article aims to help you understand the consequences of transferring real property into a trust and how you can get it done.
Advantages of transferring real estate into a trust
The advantages of funding real estate into a trust include probate avoidance, tax savings and asset management.
Any asset you fund into a trust will automatically escape probate. Possibly you already know how problematic and expensive probate can be and you would be glad to realize that funding your house into a trust will allow it pass to your loved one without having to go through the court.
- Tax savings
If your state imposes inheritance and estate taxes to property, then you may want to find ways to limit how much your loved ones would be paying as tax. Living trusts do not make you free from tax since they are revocable, and you cannot fund real property you’re using into an irrevocable trust. However, if your trust is well-designed by an estate planning attorney with an eye towards tax savings, then your final tax liabilities will be minimized to a considerable extent.
- It is relatively complex — funding a real property into a trust is not as easy as you would a piece of jewelry. It involves many formalities and any mistake can be catastrophic.
- Cost — the cost of executing a trust is also more than that of a will. While trusts offer more advantages over a will, you have to be prepared for the cost. Before taking this step, you have to ensure the trust is well-rounded to give you the best benefits. It becomes important that you seek help from an estate planning attorney.
How to transfer real estate into a trust
To transfer real property into a trust, you have to sign a new deed that transfers ownership; that is, the trust will now be the owner of the house rather than you.
The best way to go about this is to get an estate planning attorney to do it for you. This is because of the formalities involved and to avoid mistakes.
- Prepare the deed
You have to get a deed document. Your attorney can provide this or else you get it online. It must be for your specific state.
- Current owner: As the owner of the real property, write your full name in the deed. This name should be exactly how you wrote it on the original deed and the trust itself. If the property is owned by joint tenancy, then you should include your name and your spouse exactly as they are in the original deed.
- New owner: in this field, you are to put the name of the trust as the new owner of the real property. If you are the trustee of the trust, you can as well put your own name as the new owner. But in some states, it is better to put the name of the trust as the new owner.
- Description: Here, you are to describe the property exactly as it is, where it is located, and what part of it you are transferring to the trust. If it is jointly owned and you wish to transfer only your part, then you should state clearly that you are transferring only one-half the interest.
After all information is adequately filled, you should then notarize the deed. Those directly involved must also sign.
- Keep a record of the deed
You must then take the document to the office that keeps records of local property. They will make a copy of the document and keep it. They will stamp the original and give back to you.
Different states handle real property taxes differently. Most states do not request a tax so long the property is not bought with money. Some other states consider the fact that the owner doesn’t change since you as the trustee is still the owner of the property, but will impose tax when the trust becomes the new owner. You should find out this information about your state online.
- Changing Insurance records
Most real property have insurance policies covering them. Since ownership has changed, you should inform your insurance company to make the necessary changes in their document, such as the owner of the real estate. These changes would not affect the terms, cost and coverage of the policy.
Get help from an estate planning attorney near you
If you live in New York, our New York estate planning attorneys can offer you professional guidance in transferring your real estate to your living trust. Simply contact our law office today.