How Much Does It Cost to Put Your House in a Trust?

You have many legal options to plan for the end of your life and the distribution of your assets. Some people choose to put their real estate in trusts, which allows their heirs to skip the lengthy probate process. The heirs can take control of the asset faster, whether they choose to move into the house or sell it. A trust can also keep assets private, limit opportunities for contention, and simplify estate planning as a whole. 

This guide will focus on the cost of putting your house in an estate. While it will cover the benefits and potential risks of doing so, its main goal is to help you understand the financial aspects behind this decision. Learn how much does it cost to put your house in a trust before you start this process.  

What Is a Trust and Why Put Your House in One?

Three parties are involved in the establishment of trusts. The person who creates the trust is the trustor (oftentimes a parent who is placing property in a trust). The objective third party is the trustee. The trustor gives management and distribution of the asset to the trustee.

When the terms of the will are met, the trustee will distribute the assets to the last party, the beneficiary (or beneficiaries). The beneficiaries are often children who receive assets after the parent passes away. 

There are several benefits of placing a house in a trust. Here are a few reasons someone might go this route instead of opting for a traditional will.  

• Avoiding probate: During probate, a judge reviews the validity of a person’s will. This can be a slow process, preventing heirs from accessing the estate. Establishing a trust skips the probate process altogether. 
• Reducing estate taxes: Depending on the type of trust, your beneficiaries may enjoy reduced estate taxes through this option.  
• Providing clear instructions for asset distribution: Trusts are clear, detailed, and less likely to be contested. This ensures your wishes are followed after you pass. 
• Protecting assets from creditors: Your assets might be shielded from creditors if you fall into debt. This also depends on the type of trust.

Despite the ample benefits of putting your house in a trust, there are a few drawbacks. First, there are more upfront costs to set up a trust compared to establishing a will. There also might be ongoing expenses in the form of administration fees.

Trusts can be complex. There is a learning curve for setting them up and your beneficiaries will have to navigate them to receive the assets once you pass away.

Types of Trusts for Your House

The first step toward putting your house in a trust is to understand the various types available. An experienced estate planning attorney should walk you through different options so you can choose the best one for your specific needs. Here are a few common trust types and what they mean. 

• Revocable Trusts: A revocable trust can be changed after it is established. This is also known as a living trust because there are opportunities to adjust it. This is the most flexible trust option if you think your wishes will change during the rest of your lifetime. 
• Irrevocable Trusts: These trusts cannot be changed once established. However, they offer greater protection from taxes and creditors. Consider an irrevocable trust if you know your wishes will not change. 

There are also specialized trusts that you can look into that support various trustors in specific situations.

For example, a Qualified Personal Residence Trust (QPRT) is designed to reduce gift and estate taxes for high-value homes. This option is often used for living trustors who still reside in the property. Once the duration of the trust ends, the asset is passed to the beneficiary. Another option is a Testamentary Trust, which is created through a will and comes into effect after death. This is another form of irrevocable trust. 

Your estate planning attorney should listen to your goals and help you choose your ideal trust. This could be an irrevocable trust or a specific alternative depending on your needs. They can help you protect your assets and understand the financial and tax implications of each option.

Costs Associated with Putting Your House in a Trust

Trusts are often approached by individuals who want to save money, either through reduced legal fees during the probate process or by avoiding costly estate taxes. However, establishing both revocable and irrevocable trusts comes with multiple costs. Here are a few expenses you can expect to face.   

1. Attorney Fees: A basic will can be created for around $150, but the drafting fees of living trusts can cost up to $2,500. Legal fees will be higher for specialized or irrevocable trusts and they could increase the more assistance you need. Consult with your attorney to see if they offer flat fees for trust services or if you will be expected to pay an hourly rate. 
2. Trust Administration Costs: If you hire a professional trustee, you will need to pay them an annual fee. This is usually around 1% to 1.5% of the estate’s value. In many cases, the larger the estate, the lower the trustee fees. 
3. Filing Fees: The fees for transferring the house title into the trust will vary by state. These often range between $50 and $500.
4. Appraisal Fees: If the home needs to be appraised to value the estate, you can expect to pay between $300 to $600. Larger homes often have higher appraisal fees. 
5. Ongoing Maintenance Costs: Unless you opt for an irrevocable trust, you may need to pay additional legal or administrative fees to update the trust.

Costs can vary significantly depending on location, the complexity of the trust, and the professional services used. Consider whether the expenses are worth the asset protection and the potential to save on the federal estate tax. Annual trustee costs and legal fees can add up the longer your estate needs to be maintained.

Factors That Affect the Cost of a Trust

While there are several legal and tax benefits of setting up a trust, the costs are undeniable. You need to have a clear picture of what you need to pay upfront (for appraisals, filing, and estate establishment) along with any annual costs associated with this choice.

This will help you decide whether the costs and efforts are worth it. Here are a few factors that can determine how expensive your asset protection will be. 

• Complexity of the trust: More complex trusts come with higher fees. This is because the trust document has more details, requirements, and legal addendums added. Establishing complex trusts will be more expensive but can provide additional protections.  
• Professional assistance: Your total fees will vary based on whether you use an attorney, financial advisor, or estate planner. You can also look into an online estate planning tool to guide you through this process. Shop around to understand the costs of different services versus the value they provide. 
• Type of property: High-value homes or those with unique circumstances (like rental properties and second homes) may require additional documentation and costs. Larger homes often have higher appraisal costs while high-value homes fall into different tax brackets and need specific protections. 
• State-specific fees: Filing and transfer fees vary depending on state regulations. There also might be differences between establishing a trust for a primary residence versus a second home or investment property. 
• Tax implications: Some trusts may come with additional tax considerations, which could require professional advice.

Even if you think you can handle establishing a trust by yourself through online resources, you may decide to hire someone once the process gets going. This is particularly true if you also have other assets you want to pass on to your beneficiaries. 

How to Set Up a Trust for Your House

If you decide that putting your house in a trust is the right call to avoid probate court, there are a few steps to keep in mind. Understanding the process can help you transfer ownership easily and protect your various trust assets until you pass away.

Here is what you can expect as you establish this legal arrangement. 

• Pick the type of trust you need: Choose between an irrevocable and revocable trust and evaluate any specific trust options that could better suit your specific situation. 
• Consult an estate planning attorney: Work with a professional to understand the process of putting your house in a trust. Learn about any additional steps you need to take for estate planning purposes to ensure a smooth transition of your assets to your beneficiaries. 
• Name a trustee and beneficiaries: Identify who you would like to receive your estate and how it should be divided. You can also choose the trustee who will be managing the estate until your beneficiaries receive it. In many cases, estates are passed from parent to child and distributed evenly amongst multiple kids, but this does not have to be the case. 
• Draft the trust document: Specify how you want your assets maintained and distributed.
• Transfer the title of the house into the trust: This is the official change of ownership to the trustee until the beneficiary receives the tangible asset. The process of transferring the title includes recording the deed and paying any applicable fees.

While the process looks simple, it can be complex. There are legal and financial aspects that can slow the creation of the trust. Work with experienced professionals to ensure the trust is legally sound.

Is Putting Your House in a Trust Worth the Cost?

While putting your house in a trust can be a complex process, many people feel like the effort is worth it. The long-term tax benefits and ability to skip probate court can significantly help beneficiaries, especially those who want to continue living in your home after you pass.

Here are a few reasons why creating a trust-based estate plan could be worth the price tag. 

• Your beneficiaries will avoid the high costs and delays of probate. The entire probate process can take several months and even years, depending on the state of your will and if it is contested. The cost of putting a house in a trust could be worth it to avoid this process entirely. 
• Your beneficiaries enjoy a seamless property transfer to beneficiaries. Skipping probate means your heirs can immediately take control of the asset. Not only can it give them legal protections but it can also give you peace of mind knowing your beneficiaries are cared for.
• Your heirs can save on estate taxes. The taxes pulled from a trust’s assets can be significant and limit how much your beneficiaries receive. 

While there are several benefits despite the costs, there are also times when a trust isn’t necessary. The cost of retaining a trustee might not be worth it if you have a small estate or limited assets. It also might not be needed if your will is unlikely to be contested – if the assets are only going to a single child.

You also might not need a trust if your spouse will take over your assets, which is known as joint tenancy. This is why it is so important to talk to a professional before you move forward with the trust process.

Consult an Estate Planning Attorney to Avoid the Probate Process

Establishing a trust can be a valuable way to pass down your assets. You can ensure your wishes are followed and skip several months (if not years) of probate court. However, this process comes with its own costs and fees, including legal administrative fees and annual trustee costs. 

Consult with a professional if you aren’t sure whether this is the right move for your assets. A trusted estate planning attorney can offer personalized advice and help you create a plan to move forward. You can also consult a real estate agent to learn about their experiences with handling estates and trusts.

Explore platforms like FastExpert if you are interested in talking to local real estate agents. You can find someone in your area who specializes in handling estates. Many local experts are happy to help you make informed choices for your end-of-life planning.