Types of Trusts and Probate
A trust can be revocable or it can be irrevocable. In a revocable trust, the grantor—trust maker—is the trustee. They still control the property, can sell it, derive income from the property, or use it as they would before the trust. The real estate still remains property of the trust maker and creditors can claim against the assets. In an irrevocable trust, the grantor names a trustee to oversee the assets included in the vehicle. These properties and other assets are no longer the property of the grantor. They will lose most control over the assets. The grantor cannot sell the property and income from the included assets would go into a trust account. Depending on how the document is structured, they may still be able to use the property as before. An irrevocable trust removes the assets from the grantor’s taxable estate and moves them into the trust which is managed by a named trustee. If you don’t also have a will directing your property into your trust at the time of your death—called a pour-over will—or if you don’t leave a will, your state may decide which of your family members should receive ownership of the property after your death. Also, the estate will need to go through the long and costly probate process. If your property is located in another state so you specifically designed the trust to avoid ancillary probate—two separate probates in two states under different laws—your trust is useless until it’s funded with the real estate. Although funding your trust may be the most important step, it’s not the most difficult. In fact, funding a trust with your real estate is a relatively easy, clear-cut process.
Funding Your Real Estate Trust
Follow these steps to transfer the title of real estate into your trust:
Recording Fees and Costs
Recording fees and costs can vary significantly from state to state. Some states specifically exempt transfers of real estate into revocable living trusts from recordation and transfer taxes. Others will charge a nominal tax. Still, other states may consider the transfer a sale and assess full taxes. It’s important to take these local, county, and state fees and costs into consideration so you won’t be surprised. The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.
