how to put your property into a trust
Trusts are a powerful tool in estate planning. They allow individuals to manage their assets during their lifetime and ensure a smooth transition of these assets upon their death. Trusts can provide various benefits, including asset protection, potential tax advantages, and probate avoidance. This article will help guide you on how to put your property into a trust.
Top 3 Benefits of Setting up a Trust
Asset Protection
Tax Reduction
Avoid Probate
Setting up your revocable trust doesn’t do good unless you fund it. Think of a trust like a container. All the assets you place in the container will be safeguarded, but assets not in the trust will not be protected.
Funding a trust means transferring the title of an asset out of your name and into the trust. The trust then owns the asset, which is safe-guarded from probate.
Probate occurs when someone passes away, and the court decides how each asset is handled. Often, high fees and taxes are paid out of the sale of the assets. This often leaves any beneficiaries with far less than if a trust and a will existed. Having a trust set up along with a living will safeguard your assets from having to go through a pricey and time-consuming probate process after you die.
Assets with titles are those you would place into a trust. An exception to this is most vehicles. Vehicles are transferred to beneficiaries with a death certificate in many states and do not go through probate.
When you transfer an asset, such as real estate property, into a trust, you change its legal ownership. You transfer the assets from your name to that of the trust. Most people who create a living trust name themselves the trustee. If you are the initial beneficiary of the trust, you will still generally be able to use the trust assets, but the trust technically owns the assets.
To get started, you’ll want to list the assets you wish to transfer into the trust. Next, change the title from your name to the trust name. Put the name of the trust and the trustee’s name on the title.
For privacy purposes, list the trust’s name first and then the trustee’s name. Some public records only hold certain characters, and the trustee’s name may not be as easy to find online if you list that second.
Here are some examples of how to name your trust and what to put as the new title holder:
The John and Mary Smith revocable living trust, Trustees John and Mary Smith
Acorn Holdings Revocable Living Trust, Trustees Aaron Smith and Loryn Cherry
Trustees Fred and Sally Williams, Trustees of the Fred and Sally Williams revocable living trust
You may also consider creating an LLC to hold real estate assets. Then, you place the LLC into the trust.
For example:
A Tennessee LLC to serve as trustee would be entitled to a property like this:
123 Main Street Trust, ABC Holdings, LLC (Tennessee, Trustee)
In all cases, name both the trust and the trustee and clearly state that the person or company is holding the Assets in his or her capacity as trustee and not individually.
When we name a company as trustee, we must include the jurisdiction where the transferring real estate company was formed.
You can transfer your home or any other real property to a trust with a deed or document. A quick claim deed is one of the simplest ways to transfer ownership from your name to the trust.
A warranty deed ensures a good title when you transfer the home and may make it easier for your trust beneficiaries to sell it in the future.
Check with your attorney to determine the best type of deed to transfer the title.
Once your deed form is prepared, it must be filed in the county where the property is located. There is usually a nominal filing fee.
A deed transferred into a trust should not affect your mortgage, even if it has a due-on-sale clause, as addressed in the Garn-St Germain Act of 1982.
The Intersection of Trusts and the Garn-St. Germain Act
The Garn-St. Germain Act intersects with the world of trusts in a very significant way. It provides an exception to the enforcement of due-on-sale clauses when a property is transferred into an inter vivos trust in which the borrower is and remains a beneficiary and occupant of the property.
This means that a homeowner can transfer their property into a trust without triggering the due-on-sale clause, as long as they remain a beneficiary and occupant of the property. This exception does not require occupancy of the property being transferred to an inter vivos trust, but simply mandates that the transfer does not relate to a transfer of the rights of occupancy in the property.
The Benefits of Using Trusts under the Garn-St. Germain Act
This provision of the Garn-St. Germain Act can be particularly beneficial in estate planning. For instance, a homeowner can pass away before fully repaying their mortgage, leaving the property to a family member through a will or by default succession laws. The new owner can continue paying the existing mortgage—no need for a new loan or a stressful refinancing process.
Moreover, the use of trusts under the Garn-St. Germain Act can provide significant protection for homeowners. By transferring their property into a trust, homeowners can potentially avoid the enforcement of a due-on-sale clause, thereby preventing the lender from demanding full repayment of the loan upon the transfer of the property.
In conclusion, the Garn-St. Germain Act provides a legal framework that can prevent a lender from triggering the “due on sale” clause under certain circumstances, such as a transfer from an individual to a trust. This can have significant implications for homeowners, beneficiaries, and estate planning.
This safe transfer from an individual to a trust with a mortgage includes a single-family home, duplex, triplex, or fourplex in which the mortgage holder lives. The mortgage holder must be a beneficiary of the trust.
Once you’ve transferred your property into your trust, notify your homeowner’s insurance company. You may need to change your homeowner’s insurance to indicate that the trust is the owner of the property.
If you receive a real estate tax exemption, ensure it is correctly applied by showing documentation of the trust to the taxing authority, such as a certificate of trust. This document summarizes the information in the trust.
