A client recently came to our Manhattan office with a clear directive. “My neighbor put her brownstone in a trust to avoid probate,” she said, “and told me I absolutely have to do the same.” She was ready to sign. My first step was not to open my drafting software—it was to ask her to pause. A trust is a powerful instrument for generational stewardship, but it is not a universal fix. For some families, especially with their primary residence, creating a trust can introduce unforeseen costs and complexities.
The impulse is understandable. You worked your entire life to own a piece of New York, and you want it to pass to the next generation smoothly. But the right legal structure is born from your specific goals—not from a neighbor’s advice over the fence. Before you transfer the deed to your home into a trust, you must understand what you might be giving up.
Control, Complexity, and Your Lender
The most common vehicle we use is a revocable living trust. In this structure, you—the grantor—typically name yourself as the trustee. This means you retain day-to-day control. You can sell the property, change the beneficiaries, or even dissolve the trust entirely. The idea that you immediately “lose control” is a common misconception in this scenario.
The friction arises not from a loss of legal control, but from added administrative layers. Consider refinancing. When your home is in your name, the process is simple. When it’s titled in the name of your trust, a lender’s underwriting department will pause. We regularly receive calls from clients whose lenders demand a full copy of the trust agreement, a certificate of trust, and an opinion letter from our firm confirming the trustee’s authority. This adds time and legal costs to a transaction that was once straightforward.
For an irrevocable trust, the loss of control is absolute and intentional. Once you place your home into an irrevocable trust, you cannot take it back. This is a powerful tool for asset protection or Medicaid planning, but it is a profound decision. Selling or refinancing becomes a fiduciary act, guided by the strict terms of the trust—not your personal preference.
The Unintended Tax Consequences
One of the most significant advantages of owning a primary residence is the federal capital gains tax exclusion. Under Section 121 of the Internal Revenue Code, a married couple filing jointly can exclude up to $500,000 of capital gains from the sale of their home. An individual can exclude up to $250,000. For a family who bought a home in Brooklyn decades ago, this exclusion is worth a substantial amount of money.
If your home is in a properly drafted revocable “grantor” trust, you generally preserve this tax benefit. If the trust is structured incorrectly, or if you use certain types of irrevocable trusts, you risk forfeiting this exclusion. The property is no longer technically yours; it belongs to the trust. This is a detail with a six-figure impact, and it requires deliberate planning to get right.
There are also local New York considerations. Many homeowners benefit from the School Tax Relief (STAR) program, a partial exemption from school property taxes. Under New York’s Real Property Tax Law § 425, eligibility is tied to ownership and residency. While a transfer to a standard revocable trust often preserves the STAR exemption, placing the home in an irrevocable trust can disqualify the property unless the grantor retains a life estate. Losing this benefit is a small but persistent financial drain, year after year.
Is a Trust the Right Steward for Your Home?
A trust is not just a document; it is a new legal entity with its own rules. It can be an exceptional way to protect a legacy property, manage assets for a child with special needs, or provide for a spouse while protecting generational wealth. But it is not always the best tool for a primary residence, especially if you anticipate selling or refinancing.
Sometimes, a simpler approach is better. A thoughtfully drafted will can achieve a family’s goals without the administrative burdens of a trust. The key is to match the legal structure to the family’s reality—not the other way around.
The work of estate planning is making intentional choices. Before considering a trust for your property, the first step is to map out your goals for that property over the next five, ten, and twenty years. We ask every client to outline two or three possible futures for their home before we discuss the legal architecture to support that vision.
