There are many reasons that people want to create a trust and fund it with their home. Maybe you work in a risky profession and worry about the potential for a lawsuit that could leave your family vulnerable if someone comes after your personal assets. Perhaps it is part of a broader estate planning strategy to mitigate estate taxes and reduce the risk of your heirs abusing the assets you leave behind. There are many potential benefits to such a transfer.
Regardless of why you have decided to transfer your Pennsylvania home into a trust, you need to make sure that you do so properly. As with any estate planning or real estate efforts, it is almost always beneficial to seek legal counsel throughout the process to avoid making mistakes that could lead you and other people you care about financially and legally vulnerable.
You and your spouse will need to give up your (technical) ownership
The hardest or perhaps most confusing aspect of placing a property in a trust is that you no longer have your name on the title to the property. Instead, you will quitclaim your interest to the trust that you have formed. That means executing a deed transferring ownership to the trust. The trust will then own the property and have the responsibility of paying all associated costs, such as property taxes.
Depending on circumstances and local enforcement, moving your property into a trust could mean paying a higher rate of real estate taxes, as homeowners have certain homestead rights that limit their liability for taxes. Trust ownership can impact certain tax write-offs or incentives for homeowners as well.
A properly structured trust will leave you with control
Signing a deed to turn over legal ownership of your property may seem frightening, but it doesn’t have to be. Provided that the trust has the appropriate structure and rules in place to protect your rights as trustee or beneficiary, you should still be able to do what is necessary with your home, including continuing to reside there and potentially even selling it eventually.
Placing your home in a trust can protect it from seizure, reduce the value of your estate and allow tenancy to people in your family. What you can do with the property and who can legally reside there will depend on the kind of trust you create and the rules you put in place for the property. Transferring the property is also something to consider.
When you decide to sell a home in a trust, you may have to take a few additional steps to do so. The more careful you are with the way you structure your trust, the easier it will be to handle future financial transactions with the property that the trust has ownership over.