Understanding Living Trusts and Real Property: What You Need to Know

Estate planners often recommend Living Trusts as a valuable tool for managing real property ownership, especially for individuals and families looking to simplify estate transfer, minimize tax exposure, or avoid probate. When real estate is held in a Living Trust, title companies follow specific procedures to ensure a smooth transaction.

Below are answers to some frequently asked questions. For more detailed guidance, consult your title representative or legal advisor.

Frequently Asked Questions About Living Trusts and Real Property

Who are the parties involved in a Trust? 

In a typical Family Trust, the Trustors (or Settlors)—often a husband and wife—establish the trust and transfer property into it. They usually name themselves as Trustees and remain the primary beneficiaries during their lifetime. Upon their passing, the trust designates successor beneficiaries, such as children or grandchildren.

What is a Living Trust? 

A Living Trust (also called an Inter-vivos Trust) is created during the Trustor’s lifetime, unlike a testamentary trust, which is created through a will after death. The Living Trust typically dissolves upon the death of the Trustors, at which point assets are distributed to the designated beneficiaries.

Can a Trust hold title to real estate? 

Not directly. The Trustee holds legal title on behalf of the Trust. The Trust itself is not a legal entity that holds title.

Is a Trust the best way to hold title to property? 

That depends on your specific goals and financial situation. A trust may help you:

• Avoid probate
• Minimize or defer estate taxes
• Protect assets from some unsecured creditors

Always consult an attorney or tax advisor before transferring property into a trust.

Can placing property in a Trust help avoid taxes?

Married couples may be able to exempt a substantial portion of their estate and delay tax obligations after the first spouse passes. However, tax implications vary based on individual circumstances—speak with your accountant or estate planning attorney for personalized advice.

Can property held in a Trust still qualify for homestead exemption?

Yes—if the property meets all other homestead criteria, it can still qualify, even while held in trust.

Can a Trustee borrow against trust property?

Yes—if the Trust Agreement allows it, the Trustee may borrow money and encumber the property. However, not all lenders finance properties held in trust, so check with your lender in advance.

Can someone else hold title “in trust” for me?

While some individuals attempt to hide ownership through a third-party Trustee, such arrangements can be:

• Legally questionable
• Risky—since only the recorded Trustee has the legal authority to sell or encumber the property

Title companies cannot insure against misuse by a Trustee, even if private agreements exist. Always use formal and legal trust structures.

Final ThoughtsLiving Trusts can be powerful tools in estate and property planning, but they require careful consideration and proper setup. Before creating a trust or transferring property, work with your attorney, accountant, and title company to ensure your plans are legally sound and align with your long-term goals.