Most people purchase their homes without thinking about a trust. However, this option can provide some benefits to the owner and their family. By putting the property in a trust, your successor becomes the trustee. For older individuals buying homes, this may be worth considering.
Let’s say you are moving to a new state as part of your retirement plan. One option that you might want to consider is putting your home in a trust. This means that you are in charge of the property as the trustee, but your successor—the person who becomes the trustee upon your passing—gains immediate control of the property.
Being the trustee of a property gives you certain powers over where your home will pass once upon your death. It can also enable you to shield your estate from future economic problems, says Investopedia in the recent article, “Buying a Home in Trust.”
First, decide who will have the legal right to sell the home. Then, you need to determine what type of trust to set up for the estate. Let’s look at the two basic types: the revocable trust and the irrevocable trust.
A revocable trust is an agreement that establishes the rights and heirs of the estate. The owner of the trust has full control at all times and can change it when he or she wants. Based upon the way in which you set up the documents, all or one of the future trustees can also change the document at any time. Revocable means “capable of being canceled.”
In contrast, an irrevocable trust generally doesn’t allow any changes or terminations of the trust without permission of the beneficiary. The trustee acts more like a fiduciary who’s charged with maintaining the assets for the beneficiary. Irrevocable trusts can protect assets from creditors, if the assets were placed in the trust before the credit problems.
Whether creating a revocable or an irrevocable trust, it’s important to work with an experienced estate planning attorney. However, it is important to be aware of how putting a home in a trust may impact your eligibility for Medicaid, if that may be a future issue.
This plan may not work if you are buying a home in a retirement or care community. Check with a local estate planning attorney, who will be able to review the contract from the community to see if it can be purchased in this way.
Do you want to fund the future maintenance of the home? If your intention in using the trust is to pass the property on to a family member, this question will need to be answered before deciding to use a revocable or irrevocable trust.
Reference: Investopedia (October 13, 2018) “Buying a Home in Trust”