A typical estate at death will include a personal residence. It’s common for a large estate to also include a vacation home, or family retreat. Leaving real property in trust is common.
Estate plans that include a revocable trust will fund the trust by a pour-over, says Kiplinger’s recent article entitled “Should You Own Your Home in Your Trust?”
A settlor (the person establishing a trust) often will title their home to the revocable trust, which becomes irrevocable at death.
Another option is a Qualified Personal Residence Trust, which is irrevocable, to gift a valuable home to a trust for the settlor’s children. With a QPRT, the house is passed over a term of years while the original owner continues to live there, so the gift passes with little or no gift or estate tax.
Some trusts arising from a decedent estate will hold the home belonging to the settlor without any instructions for its disposal or retention. Outside of very large trusts, a requirement to actually purchase homes for beneficiaries in the trust is far less common.
It is more common in a large trust to have terms that let the trustee buy a home for a beneficiary outside the trust or keep the settlor’s home in the trust for a beneficiary’s use, including purchasing a replacement home when requested.
The trustee will hopefully propose a plan that will satisfy the beneficiary without undue risk to the trust estate or exceeding the trustee’s powers. The most relevant considerations for homeownership in a trust are:
The terms of the trust may require the trustee to ignore some of these considerations.
Each situation requires a number of decisions that could expose the trustee to a charge that it has acted imprudently.
Those who want to create a trust should work with an experienced estate planning attorney to avoid any issues.
Reference: Kiplinger (Feb. 8, 2022) “Should You Own Your Home in Your Trust?”
Suggested Key Terms: Estate Planning Lawyer, Inheritance, Asset Protection, Trusts, Trustee, Irrevocable Trust, Probate Attorney, Estate Tax, Gift Tax, Qualified Personal Residence Trust
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