What Happens to a Home That’s in a Trust?

The Successor Trustee Steps In

When someone creates a revocable living trust, they will typically name a successor trustee to take over when they can no longer serve as trustee, including after their death.

Once the successor trustee assumes that role, they become responsible for administering the assets held in the trust, including real estate.

That doesn’t necessarily mean the trustee can immediately hand over the keys to a beneficiary. There may be several administrative matters that need to be addressed first.

Depending on the circumstances, the trustee may need to secure and maintain the property, continue paying expenses associated with the home, determine its value, address outstanding debts or other obligations, and ultimately follow the trust’s instructions for what should happen to the property.

What Can Happen to the Home?

There isn’t one outcome for every home held in a trust. What happens next depends on what the trust says.

For example, the trust might direct that the home be transferred to a particular beneficiary. In another estate plan, the trustee may be instructed to sell the property and distribute the proceeds among several beneficiaries.

A trust could also provide for the property to continue being held in trust under certain circumstances.

This is one reason thoughtful drafting matters. Clear instructions can help the successor trustee understand what the person who created the trust intended to happen with one of their most significant assets.

Does a Home in a Trust Have to Go Through Probate?

One of the reasons people use living trusts in their estate planning is to allow certain assets to be administered outside of probate.

If a home is properly titled in the name of the trust, the successor trustee can generally administer the property according to the trust without putting the home through the probate process.

But there is an important distinction between creating a trust and actually funding it.

Signing trust documents does not necessarily mean that every asset someone owns automatically becomes part of the trust.

Creating the Trust Is Only the First Step

After creating a trust, assets generally need to be properly connected to it. For real estate, this typically involves changing how title to the property is held.

This step is often referred to as funding the trust.

If someone creates a trust but never properly transfers their home into it, the trust may not control the property as intended after their death. Depending on the circumstances, another legal process, including probate, could potentially be necessary.

That’s why estate planning shouldn’t end when the documents are signed.

What If You Buy a New Home Later?

Estate plans aren’t static, and neither are the assets people own.

Someone may create and fund a trust today, then sell their home and purchase a new property several years later. If the new home isn’t properly coordinated with the existing estate plan, it may not receive the same treatment as the property it replaced.

The same concern can arise when a property is refinanced, ownership changes, or additional real estate is acquired.

Major changes involving real estate can therefore be a good opportunity to review an estate plan and confirm that the property’s title still works with the overall plan.

Why Proper Trust Funding Matters

It’s easy to think of an estate plan as a collection of legal documents. In practice, however, how assets are titled can be just as important as what the documents say.

A trust may contain detailed instructions about what should happen to a home, but those instructions are most effective when the property has been properly placed under the trust’s control.

For homeowners, that makes trust funding an important part of the estate planning process, not simply an administrative detail to address later.

It’s Not Just About Having a Trust

A living trust can provide a clear framework for what happens to a home after its owner passes away. Depending on the terms of the trust, the successor trustee may transfer the property to a beneficiary, sell it and distribute the proceeds, or manage it in another way provided for in the estate plan.

But the key is making sure the property is actually part of the trust.

It’s not just about having a trust. It’s about making sure the assets you want the trust to control are properly connected to it.

If you have questions about placing real estate into a trust, reviewing how your property is titled, or administering a home after the death of a loved one, the attorneys at Law Stein Anderson, LLP can help you understand the next steps.