Real Property in Trust

Real Property in Trust

Real property in trust refers to real estate that is held within a legal arrangement known as a trust, which is designed to manage and protect the property for the benefit of designated beneficiaries.

In this context, the trust acts as a separate legal entity that can own property, including land and buildings, allowing the trustee (the individual or institution responsible for managing the trust) to handle the real property according to the terms of the trust agreement. This can include maintaining the property, collecting rental income, or ultimately transferring ownership to the beneficiaries upon the occurrence of specific events, such as the death of the grantor (the person who created the trust).

Key Features of Real Property in Trust:

1. Separation of Ownership: While the real property is legally owned by the trust, the beneficial interest is held by the beneficiaries. This can provide asset protection and facilitate estate planning.

2. Management Flexibility: The trustee has the authority to make decisions regarding the property, including selling it, leasing it, or using it for the benefit of the beneficiaries. This flexibility can help preserve the property’s value and ensure it is used effectively.

3. Tax Considerations: Holding real property in a trust can have tax implications, both for income generated by the property and for estate taxes. It is important to consult a tax professional to understand these aspects.

4. Avoiding Probate: One significant advantage of placing real property in trust is that it can bypass the probate process upon the grantor’s death, allowing for a quicker and more private transfer of ownership to the beneficiaries.

Example: An individual might create a living trust and transfer their family home into that trust. During their lifetime, they can continue to live in and maintain the property. Upon their passing, the trustee will manage the property according to the trust terms, which may stipulate that the home be sold and the proceeds distributed among the heirs.

In Texas, including Houston, creating a trust for real property can also help in managing property disputes among heirs, ensuring that the property is handled according to the grantor’s wishes.