A client came into my office last month with a straightforward goal. She owns a brownstone in Brooklyn—the home she grew up in—and wants to ensure it passes to her only daughter. Her question was simple: “Can I just put the house in a trust for her?”
The answer is yes. But in my experience, that is rarely the right question. A home is more than an asset; it is a centerpiece of a family’s story. Transferring it is not a simple transaction. It’s an act of stewardship. The real work is defining the purpose behind the transfer—the “why” that dictates the “how.” Are we trying to protect the home from a daughter’s potential divorce? Shield it from creditors? Or simply avoid the delays and costs of New York’s Surrogate’s Court?
The structure we build depends entirely on those answers. The decision to place a home in a trust is the beginning of a conversation, not the end.
Revocable vs. Irrevocable: The Question of Control
When clients consider a trust for real estate, the first distinction we discuss is between a revocable and an irrevocable trust. The difference comes down to a single concept: control.
A revocable living trust is the most common vehicle. You, as the creator (the “grantor”), transfer your home into the trust but typically name yourself as the trustee. You retain complete control. You can sell the house, refinance the mortgage, or dissolve the trust entirely. For all practical purposes, it’s still your property. Its primary function is to bypass the probate process, allowing the property to pass directly and privately to your daughter upon your death. For tax purposes, the IRS disregards it; you still claim property tax deductions on your personal return.
An irrevocable trust is a permanent arrangement. When you transfer your home to an irrevocable trust, you are making a gift. You give up control and ownership. You cannot easily undo this decision. Why would anyone do this? For two powerful reasons: asset protection and long-term care planning. By placing the home outside of your direct ownership, it can be shielded from your future personal creditors or lawsuits. It can also be a critical step in planning for Medicaid eligibility, as the home is no longer a countable asset after the five-year look-back period has passed.
This is not a decision to be made lightly. Giving up control is a significant step, and it must align with a deliberate, long-term strategy for your legacy.
The Mechanics: Deeds, Taxes, and New York Law
Transferring a house into a trust requires more than signing a trust document. It requires a legal transfer of title. We must prepare and file a new deed with the county clerk, officially moving the property from your individual name to the name of the trust—for example, “The Jane Smith Revocable Trust.”
This process has tax implications. One of the most important benefits we work to preserve for beneficiaries is the “step-up in basis.” When your daughter inherits the house, its cost basis for tax purposes is “stepped up” to the fair market value at the time of your death. If she sells it shortly after, she will likely pay little to no capital gains tax. A properly structured revocable trust preserves this crucial tax benefit. Certain irrevocable trusts can also be designed to achieve this, but it requires careful drafting.
We also consider the practical details. Under New York Real Property Law § 240-c, deeds for residential properties must be written in clear, plain English. We also review any outstanding mortgage, as a transfer could trigger a “due-on-sale” clause, though federal law often provides an exemption for transfers to a living trust.
These are not obstacles, but they are necessary contingencies to plan for. Prudent planning addresses these mechanical steps from the outset.
A Trust Is a Set of Instructions for the Future
A trust is more than a legal entity; it’s a detailed instruction manual for how you want a major family asset to be managed. It allows you to be intentional about your daughter’s inheritance in a way a simple will cannot.
Within the trust, you can define the terms of her access to the property.
- If she is young, you can specify that she only gains full control of the home at a certain age, like 25 or 30.
- You can build in protections to help ensure the house remains in the family line, shielding it from being lost in a potential divorce.
- You can appoint a co-trustee—a trusted sibling or a professional fiduciary—to manage the property alongside her, providing guidance on everything from paying taxes to maintaining the home.
This level of foresight transforms the trust from a simple transfer document into a framework for generational stewardship. It ensures the home you’re passing on remains a source of stability, not a burden.
The first step is not to draft a document but to clarify your intentions. If you are considering how to best transfer your home to the next generation, I invite you to schedule a preliminary legacy review with our firm. We can map out your goals for the property and your family, which will form the foundation of any legal strategy we might build together.
