A house trust is a special purpose trust that is a particularly useful estate planning tool for those in second marriages and for unmarried couples. In these situations it is common for the couple’s primary residence to be titled in only one spouse’s name. If the owner dies, this could leave the surviving spouse without a place to live. The owner may create a house trust that gives a surviving spouse or partner the right to occupy the owner’s house after death. The trust is revocable during the owner’s life and becomes irrevocable upon death. The trust terminates at the survivor’s death or upon other stated contingencies and passes to the owner’s beneficiaries. A house trust may help balance competing interest of the owner’s children and the surviving spouse or partner.
The trust should specify occupancy requirements such as whether the survivor must live in the house alone, who will be responsible for maintenance and upkeep, as well as any other restrictions or requirements. The owner may wish to provide the survivor the option to direct the trustee to sell the house and purchase a new residence with the proceeds. All possible contingencies should be addressed.
If the survivor will not be responsible for the expenses associated with maintenance and upkeep, the trust must have funds from which to pay these expenses. A life insurance policy is a good source of funds. If the occupant is responsible for some but not all expenses, the trust should clearly spell out the expenses the occupant is responsible for and the expenses the trust is responsible for. The trust also needs to state what happens if the trust runs out of funds with which to pay the expenses.
The trust should also specify termination events. For example, the trust might terminate if the survivor does not meet the occupancy requirements or remarries. It is important that the trust provide for termination upon vacancy or absence from the house for a specified period so as to prevent the property from deteriorating. This should include voluntary vacancy and involuntary vacancy. Upon termination of the trust, the remaining trust property will be distributed according to the terms of the trust.
Ashley Naramore is an estate planning attorney practicing in Hot Springs, Hot Springs Village, Garland County, and Saline County, Arkansas. She has her Masters of Laws (LLM) in elder law and estate planning and stands ready to help you plan for the people and projects that you love. Call her today.