One of your options when purchasing a home is to purchase it in a trust. That implies that legally the house belongs to the trust and not to you. But you can be the property’s trustee and have a lot of control over it, including what happens to it after you pass away. Although purchasing a home through a trust can have tax and other benefits, it is more difficult than purchasing one through a regular means.
Yes, you can live in a house owned by your trust, but it depends on the type of trust and the terms of the trust agreement.
Types of Trusts
There are two main types of trusts: revocable and irrevocable.
Revocable Trust:
- You, as the grantor, retain control over the assets in the trust.
- You can change the terms of the trust or even dissolve it at any time.
- You can name yourself as a beneficiary of the trust.
Irrevocable Trust:
- Once you transfer assets to an irrevocable trust, you relinquish control over them.
- You cannot change the terms of the trust or dissolve it.
- You cannot be a beneficiary of the trust.
Living in a House Owned by a Revocable Trust
If the house is owned by a revocable trust, you can live in it without any problems. As the grantor and trustee, you have the authority to use the property as you see fit.
Living in a House Owned by an Irrevocable Trust
If the house is owned by an irrevocable trust, you can still live in it, but there are some restrictions.
- The trust agreement must specifically allow you to live in the house.
- You may have to pay rent to the trust.
- The trustee may have the authority to evict you if you violate the terms of the trust agreement.
Considerations
Here are some additional things to consider if you are thinking about living in a house owned by your trust:
- Taxes: You may be responsible for paying property taxes and other expenses associated with the house.
- Insurance: You may need to obtain your own homeowner’s insurance policy.
- Maintenance: You will be responsible for maintaining the house.
- Legal fees: You may need to consult with an attorney to ensure that the trust agreement is properly drafted and that you are complying with all applicable laws.
Living in a house owned by your trust can be a good way to protect your assets and ensure that your wishes are carried out after your death. However, it is important to understand the different types of trusts and the terms of the trust agreement before making a decision. If you have any questions, be sure to consult with an attorney.
Frequently Asked Questions (FAQs)
Can I sell a house that is owned by my trust?
Yes, you can sell a house that is owned by your trust, but you will need to follow the terms of the trust agreement. The trustee will typically be responsible for handling the sale of the property.
Can I rent out a house that is owned by my trust?
Yes, you can rent out a house that is owned by your trust, but you will need to follow the terms of the trust agreement. The trustee will typically be responsible for managing the rental property.
What happens to the house when I die?
The house will be distributed according to the terms of the trust agreement. The trustee will be responsible for distributing the property to the beneficiaries.
How to Buy a House in Trust: The Steps
Revocable and irrevocable trusts are instruments for estate planning, and when implementing this kind of estate planning, there are important actions to follow.
Call in the Professionals
Seek the counsel of a financial advisor and an estate planning lawyer who understand your state’s laws and inheritance tax regulations. Since each has a unique area of expertise, you will require both of them to properly allocate your assets. According to experts, one of the most common mistakes people make is to meet separately with their attorney and financial advisor only to discover that there are issues after the legal document has been drafted.
For instance, you might miss out on potential tax benefits that your financial advisor would be more familiar with and the attorney would be unaware of if you meet with them separately. On the other hand, the financial advisor might give you advice that is not in line with the law. Therefore, it is imperative that you three communicate well with one another.