Should You Put Your House in an Irrevocable Trust?
Updated: Aug 30
In my experience, my clients who are “empty nesters” generally own their home outright, free of mortgage liens. Their home is a valuable asset that generally goes “unprotected” from probate court jurisdiction, lawsuits and liens for catastrophic medical expenses that may occur as we age.
If ownership of such a valuable asset places it in jeopardy of being taken, why not place the home in an entity where you can continue to:
occupy it,
control its use,
protect it from creditors, and
pass its value to children without government interference.
A properly drafted irrevocable trust may be such a place.
Three reasons a homeowner should consider an Irrevocable Trust:
Home Ownership In Trust Avoids Probate
Trust assets avoid probate. If you have ever had a family member pass away and you were the executor of their estate, you know how much of a headache the probate process is – not to mention costly.
The Probate Court Experience is:
Public – When a deceased person’s estate is administrated through probate, his or her assets become a public record for all to see. Do you really want others to know how much your spouse or children will inherit? Where they live?
My clients want to avoid this nightmare.
Pricey – Court costs and attorney fees necessary to comply with complex rules and mountains of paperwork will certainly unnecessarily reduce the inheritance you intend for your children.
Prolonged – The probate process can take a long time to complete, keeping assets from your children, preventing them from use and access for long periods of time.
If your house is owned by a trust, you skip the whole probate process. Upon the passing of you and your spouse, the house is transferred from the name of the trust into the name of the trust beneficiaries, generally your children. Your children are spared the cost of probate and have immediate access to the house.
Protect Assets From a Long-Term Care Event
With proper timing, when individuals use an irrevocable trust to protect assets from a long-term care event, your home will not be counted as a resource to prevent you and/or your spouse from qualifying for government assistance should you need it to pay for long-term care. Imagine how comforting it would be to be confident that if you required long-term care assistance, your spouse could continue to occupy your family home, with no liens attached, so that at your spouse’s death your children could immediately inherit its entire value.
You Maintain Control of the Use of Your Home
Home ownership in an irrevocable trust does not prevent you and your spouse from living in your home as long as you want to occupy it. The home can be sold and another one purchased within the trust and you and your spouse can occupy that home also. Your children beneficiaries can also be the Trustees of your trust to enable them to assist you while you and your spouse are alive and inherit it without government interference at your deaths.
The information provided in our blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in these articles are for general informational purposes only.