The Short Answer
If you own one house, in a state that allows transfer on death deeds, and it's going to one or two adults you trust, a TOD deed usually does the job for a few hundred dollars. In Florida, Texas and Michigan, a Lady Bird deed does the same and often helps with Medicaid. A revocable living trust earns its higher cost when you own property in more than one state, want someone to manage the house if you become incapacitated, or are leaving it to minors, a disabled relative or a blended family.
Revocable Living Trust Explained
A revocable living trust is a legal arrangement you set up while you're alive, with three roles:
- Grantor (also called settlor or trustor): you, the person who creates the trust and puts property into it.
- Trustee: the person who manages the property. While you're alive and well, that's normally you.
- Beneficiary: whoever benefits. During your life, that's you. After your death, it's the people you name.
You also name a successor trustee, who steps in if you die or become unable to manage your affairs. "Revocable" means you can change or cancel the trust at any time.
Funding: The Step People Skip
A trust only controls what it owns. For your home, that means signing and recording a new deed from yourself to yourself as trustee, for example "Jane Smith, Trustee of the Jane Smith Revocable Trust dated March 3, 2026." A trust you sign but never deed the house into does nothing for the house. It goes through probate anyway.
What Happens at Incapacity and Death
If you develop dementia or have a stroke, your successor trustee can pay the property tax, insure the house, rent it or sell it under the trust's terms, without a court guardianship. A TOD deed or Lady Bird deed can't do that; you'd need a separate durable power of attorney.
When you die, the trust becomes irrevocable. The successor trustee deeds the house to your beneficiaries, sells it and divides the money, or keeps holding it for them, all outside probate court.
Types of Trusts That Matter for a Home
- Revocable living trust. Described above. You keep full control, and for tax purposes the house is still treated as yours.
- Irrevocable trust. You give up the power to take the property back. That is what can move the house out of your estate or out of reach of some creditors, but you lose control, and the tax results change (see below).
- Medicaid asset protection trust. An irrevocable trust used to protect a home from long-term care costs. Medicaid looks back 60 months at transfers, including transfers into an irrevocable trust, so it generally only works if you set it up at least five years before applying. A revocable trust gives no Medicaid protection at all, because Medicaid treats its assets as still available to you.
- Qualified personal residence trust (QPRT). You move the house into a trust and keep the right to live there for a set number of years, after which it passes to your children. It's an estate tax tool for very large estates. If you die during the term, the house is pulled back into your estate. If you outlive it and want to stay, you have to pay your children rent.
- Special needs trust. Holds an inheritance for a disabled beneficiary without disqualifying them from SSI or Medicaid. If you're leaving the house to someone on those benefits, a deed straight to them can cost them their eligibility. A trust is usually the only safe route.
Side-by-Side Comparison
| Revocable trust | TOD deed | Lady Bird deed | Joint tenancy (JTWROS) | Will | |
|---|---|---|---|---|---|
| Typical upfront cost | Highest; commonly a few thousand dollars with an attorney | Low; often a few hundred dollars plus recording | Low; a few hundred to about $1,000 | Low; one new deed | Low to moderate |
| Avoids probate | Yes, for everything titled in the trust | Yes, for that property | Yes, for that property | Until the last owner dies | No |
| Works if you're incapacitated | Yes, successor trustee takes over | No | No | No; co-owner can't sell alone | No |
| Where available | Every state | About 32 states plus DC | FL, TX, MI, VT, WV | Every state | Every state |
| Medicaid | No protection | Depends on the state's estate recovery rules | Often helpful in FL, MI and TX | Adding a co-owner can be a penalized transfer | Home stays in the probate estate |
| Your creditors | Still reachable, in life and after death | Generally reachable if the estate can't pay | State-specific | Co-owner's creditors can reach the house while you live | Paid through probate |
| Step-up in basis at death | Full | Full | Full | Partial in many cases (see below) | Full |
| Homes in several states | One trust can hold them all | Separate deed per property, only where allowed | Only in the five states | Works but has the same flaws everywhere | Probate in each state |
Costs vary by region. A trust is usually sold as a package with a pour-over will, powers of attorney and the new deed.
What Each Option Does to Your Property Tax
In most states, putting your home in a revocable trust doesn't raise your property tax or cost you the homestead exemption, but you often have to tell the assessor and show them the trust. A TOD deed or Lady Bird deed changes nothing until you die, because you're still the owner on title.
Florida
Florida grants homestead to a person who lives in the home and holds "a beneficial interest for life" under an instrument such as a trust, which the statute treats as equitable title (Fla. Stat. 196.041(2)). So a revocable trust that gives you the right to live in the house for life keeps your homestead exemption.
Your Save Our Homes cap is also safe. Florida's definition of a change of ownership excludes a transfer between legal and equitable title when the same person keeps the homestead and no one new applies for it (Fla. Stat. 193.155(3)(a)1.b). Expect the property appraiser to ask for proof. Seminole County, for example, asks for the trust's first page, the signature pages and the homestead or grantor's rights clause.
Texas
Texas lets you claim the homestead exemption on a home held by a "qualifying trust" (Tax Code 11.13(j)). The trust must give you, as trustor or beneficiary, the right to live in the home rent-free as your principal residence, for life, for a term of years, or until the trust is revoked. It must also have acquired the home by a recorded deed. Most revocable living trusts are drafted to meet this, but check. Appraisal districts such as Dallas CAD ask for a copy of the trust with the homestead application (Form 50-114).
California
Under Prop 13, a transfer into a trust is not a change in ownership while the trust is revocable or you're its present beneficiary (Rev. & Tax. Code 62(d)), so your base year value isn't reset. You'll file a Preliminary Change of Ownership Report with the deed. The Board of Equalization treats the trustor of a revocable living trust who lives in the home as eligible for the homeowners' exemption.
At your death the trust becomes irrevocable, and that's the change in ownership date. A transfer to your children through the trust can still use the Prop 19 parent-child exclusion, but only if the child makes it their primary residence and files for the homeowners' exemption, and only up to the value limit. Details are in Prop 13 and Prop 19 explained. The same Prop 19 rules apply whether the house passes by trust, TOD deed or will.
Michigan
Michigan's taxable value "uncaps" to market value on a transfer of ownership, but a conveyance into a trust where you (or your spouse) are the sole present beneficiary is not a transfer (MCL 211.27a). The grantor of a revocable trust also counts as an owner for the principal residence exemption (MCL 211.7dd), so the PRE stays. At death, Michigan exempts transfers of residential property to close relatives from uncapping, including through a trust, as long as the home isn't used commercially afterward.
The General Rule: Expect to Refile
In many counties, a new deed to a trust shows up as a new owner of record, and some assessors drop or flag the exemption until you reapply. After you record the deed, call your assessor or check your next tax bill. If the exemption is gone, reapply right away. Missing a filing deadline can cost you a full year of the exemption. See what is a homestead exemption and property tax exemptions for seniors.
Irrevocable Trusts Are Riskier
With an irrevocable trust, the question is whether the trust gives you a present right to live in the home. Florida and Texas both allow homestead in that case, so a Medicaid trust drafted with a lifetime occupancy right can keep the exemption there. A trust that doesn't give you that right can cost you the exemption. With a QPRT whose term has ended, the children own the house and you're a renter, so the homestead exemption and any senior freeze generally end. Have the drafting attorney confirm homestead treatment in your state before you sign.
Capital Gains: The Step-Up in Basis
When you die, assets included in your estate get a new tax basis equal to market value at death (IRC 1014).
Example: you paid $120,000 in 1995 and the house is worth $520,000 when you die. With a revocable trust, TOD deed, Lady Bird deed or will, your heirs' basis is $520,000. If they sell for $520,000, there's essentially no capital gains tax.
- Irrevocable trusts generally don't get a step-up unless the trust is drafted so the house is included in your estate. The IRS confirmed in Rev. Rul. 2023-2 that assets in an irrevocable grantor trust that are outside your estate keep their old basis. Many Medicaid trusts are deliberately drafted to be included, so the heirs still get the step-up. Ask.
- Joint tenancy with a spouse: generally only the deceased spouse's half gets a step-up. In the example, the survivor's basis would be $60,000 + $260,000 = $320,000. In community property states such as California and Texas, a home held as community property can get a full step-up on both halves.
- Joint tenancy with a child: the step-up depends on who paid for the house. If you add your daughter to the deed, that is also a gift today, and if you're both on title she can block a sale or refinance.
For the sale itself, see capital gains tax when you sell your home. For why outright gifts lose the step-up, see quitclaim deed vs. transfer on death deed.
What About Your Mortgage?
Most mortgages have a due-on-sale clause, but the Garn-St Germain Act bars lenders from enforcing it for a transfer into an inter vivos trust where you remain a beneficiary and keep the right to live in the home (12 U.S.C. 1701j-3(d)(8)). The same law protects transfers to a relative at your death. Your lender may still ask to be notified, and you should tell your homeowner's insurer about the new title.
How to Choose
- One home, a TOD state, simple family: a TOD deed. Name a contingent beneficiary and keep a will for everything else.
- Home in Florida, Texas or Michigan, especially with Medicaid in mind: a Lady Bird deed, drafted by an elder law attorney. Florida owners should read Lady Bird deeds in Florida.
- Homes in two or more states: a revocable trust. It avoids a separate probate case in each state.
- Worried about incapacity, with no one you'd trust as a co-owner: a revocable trust, or at minimum a deed plus a durable power of attorney.
- Minor children, a disabled beneficiary, or a blended family: a trust. A deed hands the house over outright at your death. A trust can hold it until a child turns 25, protect benefits, or let a second spouse live there for life before it passes to your children.
- Long-term care likely within five years: talk to an elder law attorney before doing anything. A revocable trust won't help, and an irrevocable trust set up too late triggers the look-back.
Avoid joint tenancy with a child as an estate plan: it exposes the house to their creditors and divorce, can trigger reassessment in some states, and loses part of the step-up.
To see what's at stake if you do nothing, read how much probate costs, and for what your heirs will pay after the transfer, property taxes on an inherited house.
Bottom Line
All three main tools keep your house out of probate, keep the homestead exemption while you live there, and give your heirs a full step-up in basis. A TOD deed or Lady Bird deed is the cheap, single-property answer. A revocable living trust costs more but also covers incapacity, homes in several states and beneficiaries who shouldn't inherit outright. Whichever you pick, record the deed, check that your exemption survived it, and name a backup beneficiary. You can look up what your home costs in tax today on property-tax.info.
This is general information, not legal or tax advice. Trust, deed, Medicaid and property tax rules vary by state and change often. Consult an estate planning or elder law attorney licensed where your property is located.