Removing Real Estate From a Revocable Trust

Changing your mind once in a while can keep life interesting. Revocable trusts are a good estate-planning tool for people who are prone to changing their minds. You typically act as its trustee, and – during your lifetime, at least – you're also a beneficiary. The property you fund your trust with remains under your control and is therefore considered to be yours. Therefore, by the very nature of a revocable trust, you can take out what you place into it.

Funding Your Trust

A revocable trust serves no purpose and has no power unless and until you fund it with assets. Funding involves transferring ownership of property in your name into the name of your trust. You no longer hold title to your assets as an individual. You hold title in trust for your beneficiaries – yourself, and others you want to inherit from you when you die. It's a minor distinction, but going through the paperwork of funding your trust allows your estate to pass to your beneficiaries without going through probate.

Reversing the Process

In the case of real estate, funding your trust means creating a deed conveying it from your individual ownership to the trust's. After you record the deed, your trust owns your property. Reversing the process is a simple matter of creating another new deed. Because you are the trustee, you have the power to do this. This time, the deed transfers ownership from the trust back to you individually. When you record the deed, you own your property again as an individual and it's no longer part of your trust. It will be subject to probate when you die if the new deed is in your sole name, however. Other than placing your property in a trust, the only way to avoid probate is to hold title with someone else, such as your spouse, who has a right of survivorship.

Deed Considerations

Transferring ownership of your real estate back and forth between yourself and your trust might create a few complications when and if you decide to sell the property. The easiest way to transfer title is by quitclaim deed, but a quitclaim deed doesn't guarantee that you actually own the property you convey. It simply states that if you do own it, you're giving it to the trust, and vice versa. Because you are your trust and your trust is you, this wouldn't normally be a big deal. You know you have an ownership interest to transfer. If you decide to sell the property, however, the buyer might have a bit of a concern if the last recorded deeds are quitclaim deeds that don't guarantee that you actually own the real estate. One way to avoid this is to make the transfers with warranty deeds instead. These deeds guarantee that you owned the property when you gave it to your trust, and that your trust owned the property when you took it back.

After Your Death

A revocable trust is only revocable until you die. It becomes irrevocable after that point because you're no longer around to act as trustee or manage its assets. After your death, the person you've named as successor trustee must follow the instructions in your trust documents for distribution of your property. He can't remove the real estate from your trust unless your trust documents specifically direct that he has the power to do so, such as if you intend it to pass to a named beneficiary. A new deed is also required to convey the real estate from the trust to the property's new owner.

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