You'll usually need a property appraisal if someone wants to buy your house or you want to get a loan based on its value. That's not an issue with transferring your house to a living trust because no money changes hands in this transaction. But your trustee may want to know its most recent value and a trust appraisal for the property may be ordered after you die as part of managing your trust assets.
Transfer Requirements for Living Trusts
You must create a deed to transfer your house or an investment property into a trust. You would transfer title as the grantor and the current owner to the trustee, who will manage the trust's assets. The trustee is usually you if you've formed a revocable rather than an irrevocable trust.
A valid deed includes the date of transfer, your name as the grantor and trustee and the legal description of the property. The description is how the property is described in county records, not the street address. Then you'll have the deed notarized and file it with the court.
Some states have added requirements, such as a witness's signature. Ensure that you pay close attention to the legal requirements for creating trusts and deeds in your state and follow them to the letter.
The Trustee’s Job
The role of a living trust is usually to transfer your assets outside of probate after your death or to let someone manage your property for you if a time comes when you're unable to do so. Both these circumstances require that you name a successor trustee to take over for you if you've formed a revocable trust and you're acting as trustee.
The successor trustee’s job will be guided by the trust's formation documents. It's fairly simple if all the assets go to one person, but it's important to identify the house in the document and say who inherits it if you're dividing up the trust's property among several beneficiaries.
Estate Tax and Trusts
Your trust lets your estate avoid probate when you die, but it may not avoid an estate tax. The estate tax is imposed on your right to transfer your assets upon your death. Luckily, it's not always imposed on all estates. Your assets must be worth at least $12.06 million to trigger estate taxes as of 2022.
This is the point when your trust-owned real estate gets a value appraisal if the value of all its assets is greater than this threshold. Your heirs also need to know the value of the house when they inherit it, because this will affect capital gains and the taxes they must pay if they sell it.
Not all trusts are subject to estate taxes. An irrevocable trust will remove the grantor’s taxable estate from the tax calculations because ownership and control of the assets is removed from the grantor while they're still alive. As a result, the trust's assets will not contribute to the value of their estate upon their death. They didn't own them. The trust did, and the trust is still up and running and alive.
Trust Value Appraisals for Estate Planning
Although the law doesn't require that you use an appraiser, it may come in handy if your estate planning gets complicated, especially if you have a lot of wealth or potential beneficiaries.
You'll want to know the approximate value of your assets so that you can divide them fairly among your heirs. And dividing it among your children might be fairer than letting one of them inherit all of it if your house has gone up in value since you bought it. Some appraisers offer a shorter, less-detailed report than you'd need for a mortgage.
- Consumer Finance. Gov: What are appraisals and why do I need to look at them?
- American Bar.Org: Residential Real Estate FAQs
- American Bar.Org: Estate Planning FAQs Glossary
- HG. Org: Relative or Professional Trustee: What Are the Pros and Cons?
- IRS. Gov: Estate Tax
- HG. Org: Explanations of Irrevocable Trusts
A Durham, NC resident, Fraser has written about law, starting a business, balancing your budget and fighting evictions, among other legal and financial topics.