education | protecting your wealth
Trust Ownership: What's the Best Strategy for Using a Trust to Own Your Assets?
By Kali Roberge
When you own property or certain assets, you have many options relating to what the legal structure of that ownership looks like.
When deciding between sole and joint ownership — and whether the property will be owned by an individual or managed by a trust — there are many benefits and disadvantages to consider. Accordingly, you should weigh a number of different scenarios when evaluating how to best manage a valuable possession.
Understanding your choices can help determine what's best for you and why you might want to consider trust ownership as your ideal strategy for holding valuable assets. Here's what you need to know before making a decision.
What Is Trust Ownership?
When you use trust ownership, an asset (such as a home) is placed into a trust. The name of the trust is listed as the owner's name on the title or deed.
Trust ownership allows you to set up specific instructions for that distribution of property, subject to the applicable laws of the state under which the trust is created. You may be able to stipulate that your heirs will only receive the asset if certain conditions are met or after they reach a certain age. With financial assets, trusts can control how often (and when) money is distributed. Or with real estate, a trust can instruct how that property may or may not be used according to your wishes.
This is different from other types of ownership rights and definitions, including sole ownership, joint tenancy and tenants in common. As a sole owner, you have exclusive ownership rights. Depending on how the trust is set up, trustees could control the asset on behalf of the beneficiaries until the assets are distributed.
Other Aspects to Consider
Before jumping into the process, there are potential challenges that you should understand. For starters, if you don't have a trust yet, you'll need to establish one —which can be costly — and may also need to retitle any existing property you own into the name of a newly established trust.
In addition, trust records must be meticulously maintained, and the trustee may need to provide annual accounts to the beneficiaries. It's important to consider all of these potential situations when moving to set up trust ownership.
Benefits and Advantages of Trust Ownership
Trusts may, however, offer a considerable number of benefits and protections. Chief among may be protecting assets from delayed disbursement and undue taxation.
Using a trust may help you (and your family or heirs) avoid any concerns with a will being unclear or contested and ending up in probate court. For example, if something happens to you but your trust is listed as the owner of your home, the property's title could pass much more easily to your designated beneficiaries and may avoid going through a probate process.
There could also be significant tax advantages to using a trust. Valuable property could push the total value of your estate above the exemption limits for estate taxes, especially at the state level. Trust ownership may allow you to better organize your estate and maximize savings.
Because real estate is an illiquid asset, and heirs may incur ownership costs either through regular maintenance of the property or through fees paid to sell it, reducing the tax burden on the inherited property can be very important.
So, Is It Right for You?
If you decide to establish trust ownership for one (or more) of your assets, it's advisable to work with an estate planning attorney or other financial planning professional to do so. These professionals can guide you through the process to ensure all your needs are met and wishes are clearly outlined. You can hire one independently or check with your employer to see if there are available options.
Many companies now offer legal and financial planning services as an employee benefit, which can be a great way to establish your estate plan for free or at a significant discount.
There are a number of different ways property can be held, so it's important that you know the best option for your particular situation. Once you understand the pros and cons of trust ownership, you can decide whether a trust could more adequately protect your existing property as well as yourself and your family.