Why own a home in a revocable trust? There is one main reason to consider putting a house in trust: to avoid probate court. Although a living trust can be an effective estate planning technique, it is important to understand the benefits it can and cannot provide. A living trust doesn’t help with asset protection purposes or remove the home from your taxable estate. But since the probate court process is public and often involves significant legal fees for the estate, putting your house in a trust can be a wise move to discuss with your estate planning attorney.
Why own a home in a revocable trust?
What are the benefits of putting a house in a trust? The main benefit when a trust owns a house is to bypass the probate process, which is a lengthy public process.
Leaving a home to a spouse (if not owned jointly during life) or children in a will causes those assets to pass through probate. The probate legal process can take a few months or even a year and some estimates place the legal costs of probate at 3% – 7% of the value of the estate.
This becomes especially important if you own real estate in multiple states. Each state will have its own probate proceedings which can be costly, time-consuming, and also completely avoidable if the house was part of your trust assets. Again, matters before the probate court are in the public record.
Should I put my house in a trust to avoid probate?
Working with an attorney is an important part of the estate planning process. A detailed discussion of your estate planning goals can help an attorney identify what solutions may fit your needs given the property and trust laws in your state. Again, revocable living trusts avoid probate, but they don’t protect assets from creditors.
For example, for married couples, other forms of ownership, such as tenants by the entirety are preferred by some estate planning attorneys versus owning a home in a revocable trust. The strategy would need to be revisited at the death of the first spouse.
For unmarried, widowed, or single homeowners, putting the house into a trust may be the only way to bypass probate.
Revocable = control
The beauty of living trusts is that you retain control over the trust assets and the terms of the trust as outlined in the trust document. You can be your own trustee and name a co-trustee or successor trustee as you wish. At death, the terms of your trust dictate what happens to all the assets in your trust by naming the trust’s beneficiaries. A trust is the best way to ensure a smooth transfer of assets and that your wishes (as the grantor, the person creating the trust) are carried out through the trust provisions.
Here’s more on the benefits of a revocable living trust.
How to put your house in a revocable living trust
If you decide to put your home in a trust, you’ll need to transfer the deed. The easiest way to transfer ownership of the home to your trust is to work with a local attorney. They can create a new deed and make sure everything is properly titled naming the trust as legal owner. Transferring the ownership is called ‘funding your trust.’ The attorney can also file the deed with your local registry of deeds.
Buying, selling or refinancing
From a practical standpoint, most lenders will not allow you to buy or sell a home in the name of a trust. The house may need to be removed from the trust before the sale or be put into trust after purchase. This may also delay the process when refinancing your mortgage or taking equity out of the home. If you don’t have a mortgage or plan to buy with cash, there are generally fewer limitations.
Can you put your house in a living trust if you have a mortgage?
There are typically no issues transferring a house with a mortgage to a revocable living trust. You are still responsible for paying the mortgage when your trust owns the home. If you don’t pay, the lender can still take the home.
Are there tax benefits?
Putting the property in a revocable trust will not impact the personal residence home sale exclusion or mortgage interest deduction. However, you may want to ensure that placing the property in trust won’t trigger a reassessment of property taxes if a state or county no longer considers this a primary residence for tax purposes.
Homeowners and title insurance
The transfer of real estate into trust can create issues with title and homeowners insurance. You will need to ensure that your title insurance will still cover you as trustee of your living trust or if you need an endorsement. This is important because not only do lenders require you to have this coverage, but it also protects you from a number of events like someone claiming an ownership interest, liens, encroachments, easements, and so forth.
Also check with your homeowners insurance as you may need to name the trust as an additional insured party.
Inheriting a house in a trust
Revocable trusts can offer beneficiaries a step-up basis at death. This is a big benefit compared to gifts made during your lifetime. Step-up basis means the beneficiary’s tax basis in the inherited property will be the market value at the date of the grantor’s death. This can be significant for appreciated assets like homes.
If the beneficiary subsequently sells the property, they may owe little to no capital gains tax. Lifetime gifts do not receive step-up basis, instead (for appreciated property) the donor’s cost basis is transferred to the recipient.
Generally, if the home was owned in a living trust when the owner passed away, the tax treatment will be the same as explained above. However, if the home was in an irrevocable trust, trust beneficiaries probably won’t be eligible for a step-up in basis. Further, the estate may have to pay the estate tax due at the highest rates.
Final considerations on putting a house into a trust
Whether or not it makes sense to put your house in trust will depend on your situation and goals. Every situation is different and has its own complexities. That’s why it is important to work with a trust and estate law firm to understand your options and whether a trust is the right solution for you. And keep in mind, laws change and your life and financial situation will too. What may be the best strategy for you today may no longer be appropriate several years from now.
This article is for general information only as to some of the financial planning considerations of putting a home in trust. It should not be misconstrued as personal legal or tax advice. Consult an estate planning attorney to discuss your personal situation and estate planning needs.
[Last reviewed April 2025]
