Should I Put My House in a Living Trust?

At least once a week, quite literally every week, I talk to a client who says to me, “I need to put my house in a living trust.”  I had this conversation with someone just yesterday, and it was not even the first time this week.  Over the years, I have learned that there is a one-word follow-up to this statement: “Why?”  And really, whether or not the house needs to go into the living trust is dependent on the answer to that question.

Many people have heard from their friends, their family members, and, of course, the internet, that they should have a living trust.  A living trust is a wonderful estate planning tool. It can simplify the process of transferring assets to family and other heirs after a death.

That is why I ask people why they want to put their house into a living trust.  If they say, they want to put their house into a trust to protect their family when they are gone, that is a good answer. Another good answer is something along the lines of they want their family to avoid probate when they are gone, or they want to simplify the estate process for their heirs when they are gone.  Yet another good answer is that they want the value of the house to go to a certain charity or other organization, quickly and efficiently, after their death.  These are all great reasons for putting real estate in a living trust.

However, at least half the time, if not more, people tell me that they want to put their real estate in a living trust to protect it from various creditors or potential lawsuits.  That, unfortunately, is not a good reason to put your house in a living trust. A living trust does not protect you from liability.  Many people believe that a living trust offers liability protection because they are getting erroneous information from somewhere, or they have watched old movies or soap operas where properties were protected by putting them “in trust”, or someone on the internet says that is how to protect their assets. Sure, there are ways to protect your real estate by putting it in a trust, but it’s not a living trust. In fact, the types of trust out there that will truly protect your real estate from liabilities are not practical for most Americans for a whole host of reasons.

There are ways to minimize liability for real estate, particularly for investment real estate. There are even things you can do to minimize the risks for your primary residence. But the notion that you can simply stick your house in a living trust and protect it from all liability and from all creditors is completely false.

So should you put your house in a living trust? Sure. Just make sure you are doing it for the right reasons. A living trust is a solid, flexible estate planning tool. But there are also other estate planning options that might work out even better for you. You don’t have to have a living trust.  Your estate planning attorney can advise you what will work best for you based on your particular situation.