A living trust is a legal tool that you can use to own your property for you. When you have a living trust, it makes it easier to transfer what you own to your beneficiaries (which is what heirs are called in a trust) after you die. However, a trust isn't something that gets created out of thin air, and properties don't automatically get included in it just because you create one.
Before you can put property into a living trust, you have to create the trust itself. A trust is a legal entity, kind of like a person or a company, which has a life of its own. To create one, you need to define it, its rules and the people that are involved with it by drafting a trust document. Usually, an attorney will write up the document for you, although you might also be able to do it yourself.
Deeding Real Estate
Once you have the trust, you put real estate in it by signing a deed. Deeds are documents that transfer ownership of property. You received a deed from the seller when you bought the property, and when you put the property into the trust, you'll sign another deed. Legally, you're giving up ownership of the property to your trust. As an example, George Washington might have funded his living trust by deeding his house to George Washington as Trustee of the George Washington Living Trust.
The way you transfer personal property into the trust varies depending on the type of property. Some accounts might simply need to have the name on the account changed, and the paperwork for that process will vary based on the bank or financial company that holds them. When you hold physical certificates for shares of stock or mutual funds or physical bonds, the certificates themselves might need to be reissued in the name of the trust. For other assets, you might need to create a bill of sale or an assignment document, both of which are documents that prove that you legally transferred them to your trust.
In addition to the documents that you need to create to prove that you have a trust and that you legally transferred properties into it, moving what you own into a trust isn't always simple. The Garn-St. Germain Depository Institutions Regulation Act of 1982 lets you transfer your residence into a living trust without impacting your mortgage, but it could cause complications with investment properties. In addition, placing a home, vehicle or other property that needs insurance into a trust could also impact your insurance coverage.
- State Bar of California: Do I Need a Living Trust?
- Living Trust Network: Transferring Real Property to a Living Trust
- Czepiga Daly Pope: Transfer of Assets to the Trustee of a Revocable Trust and Operation of the Trust
- Chicago Tribune: Six Situations Where The Lender Can't Call Your Mortgage
- IRMI: Risk Management -- Protecting Assets When Home Ownership Is Transferred to a Trust
- Sage Insurance: Trusts and Personal Vehicle Insurance
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.