A real estate deed contains a description of a piece of real estate and it lists the names of the property owners. People and legal entities can own real estate, and if the name of a revocable trust appears on a deed, this means that the real estate in question belongs to that trust.
Revocable trusts work differently from other types of trusts. You don't entirely lose control of your property when you sign the deed over to your trust.
What Is a Revocable Trust?
A revocable trust comes into existence when the trust writer, known as the settlor or grantor, writes a trust agreement, according to the IRS. A trust is funded by titling assets in the name of the trust (in the case of an irrevocable trust), or in the name of the trustee (in the case of a revocable trust).
The trustee oversees the daily management of the assets inside the trust, including real estate. You can name yourself as the trustee of your own revocable trust. The trust document also contains a list of trust beneficiaries, and these individuals are entitled to a share of your trust's assets upon your death.
Impact on Probate
The assets inside an irrevocable trust belong to a trust rather than to you, so they're not part of your estate after you die. This is different from a revocable trust, which puts the assets in the name of the trustee.
You can directly pass real estate to your heirs with a revocable trust document, or you can instruct the trustee to sell the real estate and pass on the sale proceeds to your heirs. Neither the real estate nor the sale proceeds have to go through probate. Your heirs can avoid the legal costs associated with the probate process.
Stronger Ownership Rights
You no longer have an ownership stake in the property if you sign over the deed to your home to another type of trust, such as an irrevocable trust. But you have the right to dissolve a revocable trust at any time. This means you have the ability to take back the property at any time. You can also have the trust simply transfer ownership of the property back into your name. You must file a new deed at the county courthouse that lists you, rather than the trust, as the property owner in either case.
Considerations When Forming Trusts
Caps exist in some states, such as Florida, that prevent local authorities from increasing your property taxes by more than a fixed percentage from one year to the next. The taxes reset when the home changes hands, so your property tax could increase if you transfer ownership of your home to your trust or vice versa.
Creditors in some states aren't permitted to ask the court to force you to sell your homestead to collect a debt. You may enable creditors to make claims on that property if you sign the deed of your home over to your revocable trust.
Consult an attorney in your state about the pros and cons of trusts before transferring ownership of your assets into one. It could affect your ability to participate in other housing programs in the future, such as HUD-backed programs. You'll also want to know what your tax liabilities are.