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Hosted by Jeffrey Bellomo, Esq., CELA, LLM, and over 20 years of experience practicing in estate planning.  We’ll discuss all things Estate Planning and Law.  Our mission is to help educate so that what happened to the Bellomo family doesn’t happen to you. We hope to answer your most burning questions and support you with a solution to estate planning that works for you and your loved ones.

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  2. Benefits of Putting Your House in a Trust

Benefits of Putting Your House in a Trust

Dec 29, 2022

A person’s house is often their biggest asset and deserves protection, but in most cases transferring ownership is not enough. Putting your house in a trust is the best way to maintain control of the asset, get the step-up in basis for favorable tax implications, and protect the asset from others. But perhaps the most important benefit is the peace of mind that comes with knowing your home is safe. 

Jeffrey R. Bellomo, founder of Bellomo & Associates, is a licensed and certified elder law attorney with a master’s degree in taxation and a certificate in estate planning. He is skilled at explaining complex legal and financial topics in easy-to-understand language.

 

Key Takeaways 

02:41 – A trust is a contract=

  • A trust is a contract between three parties: the people that create it (grantor), control it (trustee), and receive it (beneficiary)
  • Note: This discussion is not applicable to tax trusts or those with wealth above $12.06 million/spouse.

04:11 - Inheriting a house v. gifting a house

  • Pennsylvania (PA) levies inheritance tax upon the actual transfer of assets: spouse = 0%; lineal descendants = 4.5%; siblings = 12%; others = 15%.  
  • If the house is in the owner’s name alone, the recipient will get fair market value at the grantor’s date of death, which often means 0% or very little capital gains tax when the house is sold
  • If the house is gifted (which can be risky), the recipient can save on the inheritance tax, but it can mean a sizable capital gains tax

09:54 – Putting the house in a trust

  • A person’s house is often their biggest asset  
  • The grantor can be the trustee, also
  • Some asset protection can be achieved by transferring ownership (e.g., from both spouses to one spouse) if the couple is faced with an imminent long-term care (LTC) situation, but this does not fully minimize the risk to the asset
  • The best protection is to put the house into a trust more than five years before going into LTC
  • This allows the grantor to live in the house and control the asset 

13:58 – Who should put their house in a trust? 

  • We recommend that a homeowner put their house in a trust to maintain control of the asset, get the step-up in basis for favorable tax implications, and protect the asset from others, including potential LTC costs
  • Technically, should not put a house in a trust if there is an open mortgage, but there are mechanisms for handling this
  • Once a house is in a trust, it can be difficult to get a loan on the secondary market

Links and Resources Mentioned

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