How to Transfer Real Estate Into Your Trust in Virginia

When you pass away, real estate titled in your own name must go through probate before it can be distributed to your heirs. If you own property in more than one state, a separate probate proceeding may be required in each state in which you own property.

Probate can be time-consuming, expensive, and expose your estate to public scrutiny. But, you can save your heirs and beneficiaries time, money, and hassle by transferring your real estate into a trust, which, among other things, will allow the property to pass on directly to your beneficiaries without the need for probate.

What is a Trust?

A trust is a contractual entity. The contract creating the trust is called the trust agreement. Fundamentally, trusts come in two flavors: revocable, and irrevocable. Revocable trusts typically become irrevocable at the death of the person making the trust. While the trust is revocable, it is a disregarded entity in the eyes of the IRS. When the trust may no longer be revoked, i.e. has become irrevocable because the grantor of the trust died, or if it is irrevocable at inception, then it becomes an entity with artificial personhood that is assigned its own TIN number by the IRS.

A trust is created by an individual, referred to as the grantor or sometimes the trustor, who will transfer ownership of his or her property to the trust. The grantor also appoints a person, referred to as the trustee, who will manage the trust and the property it owns for the benefit of third parties, referred to as the trust beneficiaries.

For instance, you may be the grantor of the trust you create, naming yourself as the trustee and your spouse as the trust beneficiary. Likewise, you and your spouse may set up a trust, naming yourselves as co-trustees and your children and grandchildren as the trust beneficiaries.

Holding real estate in trust can help avoid probate, provide greater control over how your assets are distributed to your beneficiaries, and protect your assets from creditors. Trusts are also used to achieve some tax advantages and to keep your financial matters private from the outside world.

Funding Your Trust

For a trust to work as intended, it must be funded with the assets you intend to convey pursuant to the terms of the trust.

For most assets, this simply means changing the title to reflect your trust as the legal owner of that asset. For example, the title to the asset might be changed from “John Smith” to “John Smith, as Trustee of the John Smith Trust.”

Similarly, if the asset is jointly owned, the title might be changed from “John Smith and Martha Smith” to “John Smith and Martha Smith, Trustees of the John and Martha Smith Trust.”

Funding Your Trust With Real Estate

Real estate is transferred into a trust by executing a new deed transferring the property to the trustee of your trust and recording that deed in the county recorder’s office where the property is located. In order to be a tax exempt transaction, the correct code citation must be referenced, otherwise you will end up with a large tax bill.

Then, after you pass away, to the extent that your property is held in trust, the successor trustee of your trust can transfer the real estate directly to the trust beneficiaries by a deed of distribution, without having to go through probate in the state where the property lies.

Why Hire An Experienced Virginia Estate Planning Attorney to Transfer Real Estate Into Your Trust?

A poorly drafted trust will typically still avoid probate, at the very least. But if a deed is not properly executed or recorded, it will only cause legal issues and financial problems.

It is, therefore, in your best interest to hire an experienced estate planning attorney to draft the deed transferring your real estate into your trust correctly, and record it properly in the county recorder’s office. Similarly, the deed of distribution must also follow certain formalities, and incorrect execution of the deed of distribution will cause title issues for the beneficiaries down the road.

Call our law firm today at (703) 553-2577 or use the contact form to schedule a consultation with an experienced Virginia estate planning attorney.

The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.