First, a trust is a form of ownership that separates legal title from beneficial ownership. So something held in trust is “owned” by trustees for the benefit, according to the terms of the trust, of the beneficiaries. A trustee is a fiduciary, and is required to follow the terms of the trust. Trusts have been around for centuries, and are used to serve several different purposes.
You might consider putting your home in a trust so that when you pass away it will go directly to the beneficiaries, without going through probate. You might also put a residence into trust so that you don’t technically own it anymore, but you can still benefit from it in some way (you might be able to continue living there, for example). Assets held by trusts often provide protection from creditors. If your son is a beneficiary of a trust, a creditor or divorcing spouse typically could not reach the principal of the trust, as he does not technically “own” the assets. People also put homes into trusts for Medicaid planning, or for estate tax planning. These types of trusts need to be irrevocable and carefully drafted.
Trusts take on-going work and administration once they have been created. Irrevocable trusts, in particular, require their own tax ID number, and tax returns must be filed annually.
When you put a residence into trust, you take the title of the property from your name, and put it in the name of the trustees. This is accomplished by drafting and executing a deed which is then recorded in the local registry of deeds.
Trusts can be confusing or relatively straightforward; they can provide asset protection, a way of planning your legacy, or a way of protecting your family from unexpected events. They’re an outstanding way of creating structure for a family member who has special needs, or unpredictable spending habits. If you decide to do trust planning, choose your attorney carefully, and be certain that your advisor has experience working with the type of trust you need.