Utah Estate Planning Guide: How to Put Your Home in a Trust
Protecting your assets and ensuring a smooth transition to future generations is paramount. In Utah, a popular method to achieve this is by placing your home in a trust. This comprehensive guide, tailored for Utah residents, breaks down the process and highlights the benefits.
Why Consider Putting Your Utah Home in a Trust?
Trusts can provide organized and secure means to transfer property ownership, particularly homes, to future generations. Estate planning attorneys in Utah often advise on this process for probate court avoidance, asset protection, and tax benefits.
Understanding Trusts and Homeownership in Utah
A trust acts as a separate entity that holds ownership of assets, like homes, as opposed to individual owners being on the property title. When you transfer your Utah home to a trust, it essentially means you're changing the ownership from your name to that of the trust. This strategy is popular for estate planning, tax advantages, and asset protection.
Putting your home in a trust simply means transferring ownership of your home into a trust that you have created with a trust agreement. You transfer your home to the trust by signing a deed that names the trust as the new owner of the property. The deed then needs to be recorded with the local county recorder’s office.
Once recorded, the trust is now "on title" as the legal owner of the property. The trust agreement typically names the homeowner as the trustee so the homeowner still is in control of the home and can still sell or refinance the property at any time.
Imagine Jane, a single mother of two, owning a home in Sandy. To ensure that her children don't face legal hassles after her time, she transfers the title of the house to a trust. Now, this trust entity is the legal owner, though Jane continues to live there and manage it since she is the trustee of her trust. She is still free to live in her home and sell it at any time but if she passes away, her successor trustee can sell the home just as easily. This is the essence of putting your home in a trust.
Types of Trusts for Homeowners in Utah
Broadly, trusts are classified into:
1. Revocable Trusts:
Easily amended based on the homeowner's wishes. These are often called "living trusts" and can simplify the process of transferring assets after death, avoiding Utah probate court.
Think of Peter, a retired army officer living in Salt Lake County. He places his condo into a revocable or living trust, retaining the flexibility to make any changes if he wishes. This is a great choice for estate planning without getting caught up in probate procedures.
2. Irrevocable Trusts:
More rigid structures, primarily used for tax benefits and asset protection.
For example, a Qualified Terminable Interest Property Trust (or QTIP Trust) is an irrevocable trust used to maximize a couple's applicable exclusion amounts if estate taxes are applicable to them because they own more than the current estate tax exemption. A Domestic Asset Protection Trust (or DAPT) is an irrevocable trust used to shelter assets from future creditors.
For instance, Lisa and Robert, a couple in their 50s, own several properties in Utah county. They opt for a QTIP Trust to potentially minimize estate taxes and a DAPT to safeguard their assets against unforeseen future creditors.
Advantages of Trusts in Utah
Probate Avoidance: Utah probate procedures can be lengthy and expensive. A trust bypasses this, offering a smoother transition.
Tax Benefits: While revocable trusts don't offer tax advantages, many irrevocable trusts in Utah can help minimize or delay capital gains or estate taxes.
Asset Protection: A DAPT allows a person to put property into a trust for their own benefit while keeping it away from future creditors.
For instance, when David passed away, his children were stuck in the tedious, costly, and time-consuming process of probate. Had David placed his home in a trust, his successor trustee, say his eldest daughter, would have had the authority to handle, sell, or manage the property without this cumbersome procedure.
Common Pitfalls
There are upfront costs to creating a trust and putting your home in a trust and those costs may range from $500 for a DIY option to several thousands of dollars to hire an attorney.
However, revocable trusts do not require annual maintenance or renewal fees so once the home is in the trust, there should be no further costs.
For more complex irrevocable trusts that require a separate tax ID number, there may be annual tax filings for the trust that need to be made each year.
The most common pitfall, however, is creating a trust but not transferring title to your home to the trust.
For example, John, a college professor in Salt Lake City, invested in a DIY trust creation kit but later found out that the process of actually transferring his home into the trust was not covered. This example highlights the upfront costs and potential pitfalls one might encounter without proper legal guidance.
How to Transfer Your Utah Home to a Trust
Draft and sign a trust agreement.
Sign a deed that transfers the home to the trust, making sure to include the name of the trustee, the trust name, and the trust date.
Record the deed with the appropriate Utah county recorder's office and pay any associated fees.
Let's follow the journey of Amy, a tech entrepreneur living in South Jordan:
Amy creates and signs a trust agreement.
She signs a deed transferring her townhome to her trust, titling it "Amy Williams, Trustee of the Williams Family Trust, dated 1st January 2023."
Amy sends this deed for recording at the local county recorder's office and pays the applicable $40 fee. Voila! Her townhome is now safely in her trust.
Who should consider this?
We recommend a simple revocable trust to anyone that is a homeowner because it helps avoid probate court upon the death of the homeowner. Probate court can cost thousands of dollars and may take more than a year to complete so putting their home in a trust is a great way to avoid all of that.
An irrevocable trust may be recommended to someone that is looking to save on taxes or is wanting to shield their assets from future creditors.
For instance, Samantha, a well-established surgeon in Riverton, wanted to shield her mansion from possible lawsuits, so she opted for an irrevocable trust. On the other hand, elderly couple Mark and Susan in Draper just wanted a straightforward way to pass on their family home to their kids without legal complications, so a revocable trust was their go-to.
Do Utah Residents Need a Lawyer?
While there are many do-it-yourself trust creation options out there, nearly all of them do not help with actually transferring your home to the trust (which is usually the entire reason to create a trust).
Some of these do-it-yourself options are quite good and they can save a lot of money instead of hiring a lawyer.
However, they do not help with putting a home into a trust and you will need to either figure out how to do that yourself or hire an attorney to actually put the home into the trust.
Think of Alex, a DIY enthusiast living in Bluffdale. He managed to set up a trust using an online platform but hit a roadblock when it came to the crucial step of transferring his home. This underscores the importance of seeking legal counsel, even if just for the final, pivotal steps.
For personalized advice on estate planning and trusts in Utah, contact Cutler | Riley Law for a free consultation.