Is it Wise to Put Your Home in an Irrevocable Trust in Maryland?

The possibility of putting your home into a trust might arise during the course of estate planning. But what kind of trust should you put your home into? What about an irrevocable trust?

If you put your home into an irrevocable trust, you might not be able to remove it from the trust. Although there are some estate tax perks that come with putting a house into an irrevocable trust, those benefits might not outweigh the risk of giving up your legal rights to your property. You can put a home into an irrevocable trust by executing a declaration of trust document and retitling property accordingly. Taking your home out of an irrevocable trust might be possible through court approval, provided beneficiaries agree to the alterations and the alterations do not violate the material purpose of the irrevocable trust.

You can call the Maryland wills and estate planning lawyers of Rice, Murtha & Psoras at (410) 694-7291 to set up a free case review today.

Should You Put Your Home in an Irrevocable Trust in Maryland?

Putting your home in an irrevocable trust is a risk, as once you make the trust and transfer your home to the trust, you will only be able to change it under very specific circumstances.

When you create an irrevocable trust, you can only change it if the named beneficiary or beneficiaries approves the changes. Putting assets, like your home, into an irrevocable trust means you give up your legal rights to the property.

While there are tax benefits to putting a home into an irrevocable trust and other benefits, like asset protection from creditors, it is important to carefully consider your reasons for creating an irrevocable trust and whether or not your named beneficiary or beneficiaries will agree to your wanting to modify the trust in the future.

Instead of putting your home into an irrevocable trust, you can put your home into a revocable trust. This can allow your beneficiaries to avoid probate on your home after your death, as they would if the property was in an irrevocable trust, but also allow you to change or modify your trust while you are alive without approval from beneficiaries, so long as you are the named trustee.

How to Put Your Home in an Irrevocable Trust in Maryland

If, after conferring with our Bethesda, MD wills and estate planning lawyers, you decide you do want to put your home in an irrevocable trust, we can help you create the trust and transfer assets accordingly.

To create a trust, you will have to write a declaration of trust document. In this document, you will transfer all legal ownership of assets placed into the trust, including your home, if you choose to do so. The trust will become officially created once the trustee accepts ownership and the property put into the trust is retitled to reflect its new ownership. The process of setting up a revocable trust is very similar to setting up an irrevocable trust in Maryland.

When creating a trust, you must be careful and intentional about the phrasing included within the trust document so that it accurately reflects your wishes. Suppose you want to make a revocable trust to put your home or other property into. In that case, our lawyers will include methods of altering the trust within the trust document so that changes can be made more easily if necessary.

How to Take Your Home Out of an Irrevocable Trust in Maryland

The purpose of trusts is to carry out the intent of settlors. So, by creating an irremovable trust in the first place and putting your home into it, you signal that your intent is to keep your home in an irrevocable trust. Because of that, changing an irrevocable trust after it has been created can be challenging. That said, if you put your home into an irrevocable trust and then changed your mind and decide you want to remove your home from the trust, you might be able to do so in Maryland.

Non-Judicial Trust Agreements

The first way to change an irrevocable trust is through a non-judicial trust agreement. To change the trust this way, you will have to get the consent of all interested persons and beneficiaries. Furthermore, any modifications made to the trust cannot violate the material purpose of the trust, according to Md. Code, Ests. & Trs. Art., §14.5-111(c). If you wish to remove your home from the irrevocable trust, that might be seen as a violation of its material purpose. Administrative changes and other smaller alterations are easier to make using non-judicial trust agreements. Taking your home out of an irrevocable trust might not be possible through a non-judicial trust agreement with beneficiaries.

Judicial Approval

The second way to change an irrevocable trust is through judicial approval. The court will review the terms of the irrevocable trust and its intent to decide whether or not the proposed changes violate the material purpose of the trust. The court might consider other evidence, the settlor’s original intentions when creating the trust, and whether or not beneficiaries of the trust contest any proposed changes, according to Md. Code, Ests. & Trs. Art., § 14.5-410(a)(2).

Taking your home out of an irrevocable trust is not impossible, but it can be difficult. To avoid finding yourself in a situation where your home is an irrevocable trust and cannot be removed, despite your wishes, review the pros and cons of putting your house into an irrevocable trust in the first place. Creating a revocable trust might serve you better, depending on your reasons for creating a trust and transferring property to it.

Call Our Maryland Lawyers Today

For help with your case from the Dundalk, MD wills and estate planning lawyers of Rice, Murtha & Psoras, call (410) 694-7291.