NCOA National Council on Aging

Help With Decision Making


Estate Planning

Check the National Endowment for Financial Education website for information about estate planning.

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Key Questions to Consider

Why should I consider putting my home into a trust?

When you put your property in trust, the trust owns it, and the “Trustee” is obligated to handle it according to the instructions in the trust. In creating a trust, you decide who receives your assets after your death and when they receive them. This can avoid the risk that other relatives may contest your will or claim rights to the home.

If all your assets are properly transferred into the trust, upon your death the assets can be transferred to your named beneficiaries without going through probate. This can avoid a lengthy and potentially costly legal process for your heirs. Depending on the terms of the trust, you also may be able to protect your home from some creditors.

Who manages the trust and has control over decisions regarding my home?

The person who sets up a trust and manages it is called a grantor or trustor. The person who manages the trust, and makes many of the decisions, is the trustee. You can name yourself as the trustee. You can name those you want to receive the assets of the trust—children, relatives, friends, or a charitable organization—as the beneficiaries. The trustee is obligated to follow the instructions in the trust and to protect all the beneficiaries.

A trust is not a just a document: It is a legal entity that must be administered after it has been established.

What are the challenges of putting my home into a trust?

There are many kinds of trusts, including trusts that are designed to pay income to the surviving spouse or children after you die, obtain tax benefits by preserving some of the assets for charity, or minimize gift taxes. It takes time and effort to set up and maintain a trust. Many people start the process but fail to complete the transfer of all their assets into a trust, or they fail to keep the required financial records. The trust may then fall into disuse and cause more confusion for the heirs.

Carefully consider all the costs and benefits of using a trust. If your estate is small, your estate planning should be simple. Trusts for high-income taxpayers and trusts designed to accomplish tax objectives can be very complicated and require the help of an expert.

What is a revocable trust?

A revocable trust, or living trust, allows you as the grantor to manage the property and assets that are put into the trust during your lifetime.  As long as the trust is revocable, you can usually change the trust by adding more assets or beneficiaries or by revoking it entirely. You also can change the terms of the trust, such as how your property will be distributed to your beneficiaries after you die.

With this type of trust, you can still sell the house, refinance it, or take out a home equity line of credit. Since you retain control and you have the right to revoke the trust, it probably will not protect your home and other assets from creditors or in a divorce.

Trusts intended to avoid probate and pass assets to the next generation are generally revocable until death.  However, if you are concerned about avoiding taxes or fully protecting your assets, you may need to make the trust irrevocable. Check this fact sheet from the National Consumer Law Center for tips about living trusts.

What is an irrevocable trust?

An irrevocable trust, or a trust that becomes irrevocable because one spouse dies, permanently owns the assets in it. It is not easily changed by a grantor, acting alone. You should consult with an estate planner or wealth management professional as an advisor in helping you make the decisions about setting up and putting assets in any trust.

What is the difference between a will and a trust?

Both are legal documents that redistribute your assets. A will passes through a process called probate supervised by the court and becomes a public record. A trust remains private, avoiding probate and many of the associated fees.

Even if you set up a trust, you will still need a will to dispose of personal property and assets that you did not include in the trust. Talk with your attorney about the pros and cons of each and which one may be appropriate for you.

Cost Concerns

How much could my estate save if I put my house into a trust?

A will must pass through probate and may result in court fees, personal representative fees, attorneys’ fees, accounting fees, appraisal fees, and miscellaneous fees. In most states, estates valued less than $50,000 do not pass through probate. In these situations, a will would be the most cost-effective option. The IRS uses the value of the gross estate to determine if it is exempt from probate, gift taxes, and estate taxes.

Depending on the laws of your state, if your estate is worth over $100,000 it likely will go through probate unless your assets have been placed into a trust. In this situation, a trust may help your heirs avoid court and other fees related to probate. Estate and gift taxes are a complex area of the tax code. If you have a sizable estate, you should work with an experienced attorney or accountant.

What are the costs of preparing a will?

You can prepare a will using documents purchased online for under $100 from companies such as LegalZoom.  You can spend several hundred dollars or more to work with an attorney depending on the complexity of your estate.

What are the costs of setting up a trust?

The cost of a setting up a trust can range from $35 to download a software program online to thousands of dollars for a highly qualified attorney to help you deal with a sizable estate.

Keep in mind that a trust is not a one-size-fits-all solution. You and your family have specific needs that should be considered in creating a trust. A trust that is not set up properly or does not reflect your true intentions can cost more in the long term. It can be worth the expense to work with a law firm that has experience with real estate and estate planning.

What additional legal, financial, or administrative burdens will my heirs face should I decide to put my home into a trust?

The individual that you appoint as your trustee will face significant and complex legal obligations in administering the trust. This should not be underestimated.

If your children or other heirs are inclined to disputes, the trustee may become the target of litigation. If the trustee cannot or will not perform his or her duties, or if disputes arise, the cost and delay of appointing a professional trustee may be more than the cost and burden of going through probate.

Consumer Cautions

Who owns my home after I put it into a trust?

To place a house into a trust, you will record a deed that makes the trust the owner of the house. Since the house is no longer titled in your name, you are no longer the owner of the home.

As grantor or trustee of a trust, however, you can probably still live in your home for as long as you wish, depending on the terms of the trust.

Can I be eligible for Medicaid if I put my house into a living trust?

Medicaid is a joint federal-state program that pays medical and long-term care expenses for seniors with low incomes and those who have impoverished themselves paying for care. To determine whether you qualify for benefits, Medicaid agencies look closely at your income and assets to see if they meet the financial eligibility requirements. They do not count the value of your home up to $500,000 (up to $750,000 in some states).

If done correctly, you can put your assets into a trust and qualify for Medicaid. You should make this decision while you are still healthy. Agencies will review your financial activities over the five years before you apply to Medicaid to make sure that you are not using a trust to transfer assets so you can qualify financially for this program.

Medicaid rules and requirements are complex and vary by state. Work with an estate planner who understands Medicaid rules to learn whether a trust is right for your situation.

Do I need to put my house into a trust to avoid probate?

Although a trust can be an effective way to avoid the probate process, many people may never have to go through probate. For example, property that is owned jointly by you and your spouse will go the surviving spouse without going through probate. If you have a small estate, it may not need to go through probate.

How can I avoid scams when setting up a trust?

Trusts are complex legal instruments. There are scam artists who market simplistic forms as trusts. Be aware that setting up a trust properly involves more than filling out forms to establish the trust. You also need to transfer your assets into the trust. If you do not complete these transfers or fail to use the trust to conduct future transactions related to the assets, your estate may have to go through probate despite the existence of the trust document. Incomplete or inaccurate documents can make things more complicated instead of simpler.

Be careful of promotions that suggest that you can use a trust to avoid taxes, including income taxes.

Scammers often use high-pressure seminars, telephone calls, and the Internet. In some cases, they may try to steal personal information by asking you to fill out forms with questions about income and assets. Some scammers will tell you that they specialize in living trusts but instead are trying to sell you life insurance or another financial product.

Beware of individuals who claim that AARP has endorsed their product. Work with an attorney you trust and never sign anything you do not understand. Visit this site for more information about living trust scams.

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