Should You Put Your Home in a Trust?
I’m not an attorney, a CPA or a financial advisor, and this isn’t legal or tax advice. Property, probate and trust law are largely state law and vary a great deal. Use this to walk into an estate attorney’s office with better questions, not to skip the visit.
Maybe it was a flyer for a free lunch seminar. Maybe a friend at church swears by hers. Maybe your brother-in-law said, “You’ve got to put the house in a trust,” with the confidence of a man who has never read one.
The pitch is usually some version of the same promise: avoid probate, save your kids a fortune, protect the house.
Part of that is true. Part of it is half true. And one part of it is flatly wrong, and it’s the part people most often believe.
A few weeks ago, in The House Is the Hard Part, I said the ways of passing down a house are not interchangeable. This is the closer look at the one people ask about most.
What “putting the house in a trust” means
When most people say this, they mean a revocable living trust. You sign a trust document, and then you sign a new deed that moves the house from your name into the trust’s name. Usually you are the trustee, so you still run everything. You live there, sell it, refinance it, or change your mind and undo the whole thing.
You also name a successor trustee, the person who takes over if you die or can’t manage your affairs. At your death, that person transfers the house to whoever the trust says, without going through probate court.
That’s the whole machine. Everything else is details, and the details are where the money is.
What a trust does well
It keeps the house out of probate. Probate is the court process that validates a will, pays debts and distributes property. In some states it’s quick and inexpensive. In others it’s slow, costly and public. A trust lets your successor trustee handle the house privately.
It covers the day you can’t manage things yourself. This is the benefit people underrate. If you have a stroke or develop dementia, your successor trustee can step in and manage or sell the house under the trust’s terms. Without a trust, your family relies on a durable power of attorney, which also works, if you have one and the bank or title company accepts it. More on that in Who Speaks for You While You’re Still Here.
It helps if you own property in more than one state. A house here and a cabin there can mean probate in both places. A trust can avoid that.
It lets you set conditions. If a beneficiary shouldn’t receive a house outright (a child with debts, a blended family, a grandchild who’s still young), a trust can spell out who gets what, when.
What a trust does not do
Here’s where the pitch goes wrong.
It does not save taxes. A revocable trust doesn’t lower your income tax or your property tax, and estate tax isn’t the issue for most families anyway: the federal exemption is $15 million per person in 2026. If someone tells you a living trust is a tax strategy for an ordinary home, be careful.
It does not protect the house from a nursing home. This is the big one. Under federal Medicaid law, the assets in a revocable trust are counted as yours. Putting the house in one doesn’t shelter it from long-term care costs or Medicaid’s rules. AARP has also noted that a trust generally has to be irrevocable to protect assets from creditors.
An irrevocable trust is a different animal. It can be part of Medicaid planning, but you give up control, Medicaid looks back 60 months at transfers, and there’s a tax trap. In 2023 the IRS confirmed that assets in an irrevocable trust that aren’t included in your estate at death don’t get the step-up in basis, the rule that can wipe out decades of capital gains for your heirs. That’s an elder-law attorney’s job, not a seminar’s.
Two pieces of good news
The step-up survives a revocable trust. Property held in a revocable trust is on the IRS’s list of property that receives a stepped-up basis at death. Your children keep the tax advantage I walked through in the September piece.
Your mortgage usually isn’t a problem. People worry the bank will call the loan when the deed changes. Federal law, the Garn-St Germain Act, bars a lender from enforcing a due-on-sale clause on a transfer into a living trust when the borrower is and remains a beneficiary, as long as the transfer doesn’t hand occupancy to someone else. It applies to homes with fewer than five units. Tell your lender anyway.
The cheaper option nobody at the seminar mentions
About 30 states plus the District of Columbia allow a transfer-on-death deed (some call it a beneficiary deed). You record a deed now that names who gets the house when you die. You keep full ownership while you’re alive, you can revoke it, and at your death the house passes without probate. The beneficiary also gets the stepped-up basis.
It usually costs a fraction of a trust. A typical attorney-drafted living trust runs roughly $1,500 to $4,000, more for complicated estates. A TOD deed is often a short document and a recording fee, though you should still have a lawyer draft it.
It has limits. It does nothing while you’re alive and incapacitated. It doesn’t let you set conditions. And title insurance can be complicated after it’s recorded.
A trust you never put the house into is just an expensive binder.
The mistake that wastes the whole thing
The most common trust failure isn’t legal. It’s paperwork. People sign the trust and never sign the new deed. The house stays in their own name, and it goes to probate anyway, right alongside an expensive binder.
If you do this, make sure the deed is actually recorded, and ask who’s responsible for recording it.
Watch for the sales pitch
Elder-law attorneys have warned for years about “trust mills”: high-pressure sellers, often not lawyers, who exaggerate probate costs, sell one-size-fits-all documents, and sometimes use the meeting to gather your financial details and sell you an annuity. AARP says it doesn’t endorse any living trust seller, so be suspicious of anyone who implies otherwise.
If the free lunch comes with a deadline, walk out with the sandwich.
My pick
For most readers, I’d go in this order.
First choice: a transfer-on-death deed, if your state allows it, you own one home in one state, your family is straightforward, and you already have a durable power of attorney and health care documents in place. It avoids probate, keeps the step-up, and costs the least.
Choose a revocable living trust instead if you own property in more than one state, your state doesn’t allow TOD deeds or has expensive probate, you want conditions on who inherits, or you want one clean plan for the day you can’t manage things yourself.
Consider an irrevocable trust only with an elder-law attorney, only as part of long-term care planning, and only knowing you give up control and may give up the step-up.
The strongest argument against my pick, left standing: a TOD deed does nothing for you while you’re alive. If you have a stroke and the house needs to be sold to pay for your care, your family is relying on a power of attorney that a bank or title company may question. A trust handles that cleanly. If incapacity worries you more than probate, the trust may be the better buy, and that’s a fair call to make.
Questions to ask before making the move
Take these to the attorney. Write the answers down.
- Does my state allow transfer-on-death deeds, and what would probate actually cost here? Get a real number, not a scary one.
- If I can’t manage my own affairs, who handles the house, and how? Does my power of attorney cover real estate?
- Who should be my successor trustee, and have I asked them? Being named and being willing are different things.
- Will this be revocable or irrevocable, and what does that do to my step-up and to Medicaid?
- Do I need to tell my lender, my homeowner’s insurer and my title insurer? Should the trust be added to the insurance policy?
- Does moving the house into the trust affect my homestead exemption or property tax? This varies by state.
- Who records the new deed, and is that included in your fee? Is the fee flat?
- What else needs to go into the trust, and do I still need a will to catch what’s left out?
What to do this week
- Find your deed and check exactly how the house is titled today.
- Look up whether your state allows transfer-on-death deeds. Your county recorder’s or state bar’s website is a good start.
- Confirm you have a durable power of attorney that covers real estate.
- Ask your children the question from September: does anyone actually want the house?
- Book an hour with an estate attorney and bring the eight questions above.
A trust isn’t magic, and it isn’t a scam. It’s a tool. The right one depends on your state, your family and what you’re actually worried about. Decide that first, and the paperwork gets simple.
Go be bold!
Have you been pitched a living trust at a seminar or a free lunch? Reply and tell me what they promised. I’ll answer the most common claims in a future piece.
Sources
- AARP — The Pros and Cons of Living Trusts — what a living trust does, funding the trust, and why a trust generally must be irrevocable to shield assets from creditors
- 42 U.S. Code § 1396p (Cornell LII) — revocable trust assets counted as available for Medicaid, and the 60-month look-back
- Journal of Accountancy — No basis step-up for grantor trust assets — Rev. Rul. 2023-2 on irrevocable trusts, and revocable trust property’s eligibility for the step-up
- 12 U.S. Code § 1701j-3, Garn-St Germain (Cornell LII) — the bar on due-on-sale enforcement for transfers into a living trust
- New York State Bar Association — memo on transfer-on-death deeds (2024) — the roughly 30 states plus D.C. that allow them, the stepped-up basis, and title insurance concerns
- LegalZoom — How Much Does a Living Trust Cost? — the typical $1,500 to $4,000 range for an attorney-drafted trust
- ElderLawAnswers — Beware Living Trust Scams — warning signs of trust mills
- Morgan Lewis — New $15 Million Federal Exemption Becomes Law — the 2026 federal estate tax exemption
