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A trust can simplify the transfer of what is often a person’s most valuable asset: their real estate. It can keep a home out of the probate process and allow it to become the property of loved ones or a charity upon the homeowner’s death.
For many households, home equity represents their largest financial asset, and it has burgeoned. U.S. homeowners with mortgages saw their equity increase by $281.9 billion at the end of 2024 compared with a year before, according to CoreLogic, a provider of property insights.

Here, a closer look at protecting assets by putting a house into a trust.

Why Put a House in a Trust?

There are two main reasons: avoiding the probate process and protecting your property if you become incapacitated.

Put simply, probate is a court review of a deceased person’s will and assets. This involves resolving any claims against the estate, paying remaining debts, and distributing the decedent’s assets to their designated heirs.

Probate can be a lengthy and costly process. In the absence of a will, the probate court divides the estate according to the state’s succession laws. These proceedings often require hearings and a variety of legal and court fees, which can significantly chip away at the estate before it reaches the heirs.

Even with a will in place, probate is often necessary for your heirs to have the right to carry out your will. Things can become further complicated if the estate includes property in multiple states or the will is contested.

Putting property in trust can avoid probate altogether. A trust designates a successor trustee to manage the estate, as well as beneficiaries to receive assets, after your death. The trust can include clear instructions and conditions for allocating assets. This can help reduce the time and cost to pass your home to your heirs.

It’s also worth noting that trusts can safeguard assets if you become incapacitated and are unable to care for yourself. A trust can be created to take effect in this situation, thus allowing a family member or loved one to manage your estate and assets in your best interests. If you recover, you can resume the role of trustee for the estate.

Recommended: What Is a Trust Fund?

Do You Need a Trust If You Have a Will?

Only one in four U.S. adults has a will, according to one recent report. And even if you have created one, you may wonder whether you are handling your assets properly. For instance, you may ask yourself, “Should I put my house in a trust?” The answer will depend on your own financial goals and the needs of your heirs.

Whom you intend to inherit your house is an important factor to consider. Federal estate and gift tax law permits the transfer of a house and other wealth to a spouse without tax liabilities. However, passing on a house to children or relatives of a subsequent generation can be more complex.

A trust goes into effect once you sign it and is generally more difficult to challenge than a will. Placing a house in a trust also avoids the probate process — it’s not uncommon for the courts to take months or a year to settle a will, especially for larger estates.

Wills and trusts can be complementary tools for estate planning. For instance, a will can take care of smaller assets like family heirlooms that aren’t covered by the trust. Also, wills can be structured to move assets into a trust when you die.

Types of Trusts for Estate Planning

There are multiple options available for putting your house in a trust. It’s important to consider financial goals, your beneficiaries’ needs, and creditor concerns when creating a trust.

Here’s an overview of common types of trusts, including how they work for passing on a house or other property. The basic kinds are revocable and irrevocable and they are typically part of an estate planning checklist.

Revocable Trust

Also known as a living trust, a revocable trust gives grantors more control in the management of their assets while alive. They’re still responsible for tax payments and reporting on investment returns.

If desired, a grantor can make changes or dissolve a revocable trust after it’s created. Getting remarried or buying a home could be possible reasons for altering a revocable trust.

Usually, the grantor (establisher) serves as the trustee (manager for beneficiaries), and a named successor only takes control if that person dies or becomes incapacitated.

A revocable trust becomes irrevocable upon the grantor’s death. A revocable trust does not protect a house and other assets from creditors while the grantor is alive.

Irrevocable Trust

An irrevocable trust differs in that it can’t be modified by the grantor without the approval of all beneficiaries. You effectively give up control and ownership of any assets placed in an irrevocable trust.

So why put your house in a trust with such rigid conditions? Irrevocable trusts can offer greater security for beneficiaries and render assets untouchable to creditors. Plus, you’re not subject to estate taxes because the assets are no longer yours.

Before permanently forfeiting assets to an irrevocable trust, it could be beneficial to consult a lawyer or find a financial planner.

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Other Types of Trusts

Aside from the two broad categories of trusts, there are more specialized options to address specific needs. Here are some additional types of trusts to consider.

• Charitable Trust: This type of trust transfers assets to a designated nonprofit organization or charity upon the grantor’s death. A charitable trust can be housed within a standard trust to allocate a portion of assets to a nonprofit while leaving the rest for family members or other heirs.

• Testamentary Trust: A trust can be created within a will, often for minors, with defined terms that take effect after your death. This is a type of revocable trust, as changes can be made up until death. It’s worth noting that a testamentary trust does not avoid probate court. The executor will probate the will and then create the trust.

• Generation-Skipping Trust: Instead of passing on a house to your children, you can use a generation-skipping trust to transfer assets to your grandchildren. This is more common for estates that exceed the federal estate tax threshold ($13.99 million in 2025) to avoid some estate tax payments down the line.

• Spendthrift Trust: If you’re concerned about how your beneficiaries will manage their inheritance, you can use a spendthrift trust to set stricter terms. For example, you could define a date or age when beneficiaries gain access to certain assets.

💡 Quick Tip: There are two basic types of mortgage refinancing: cash-out and rate-and-term. A cash-out refinance loan means getting a larger loan than what you currently owe, while a rate-and-term refinance replaces your existing mortgage with a new one with different terms.

Should I Put My House in a Trust?

It’s important to understand the implications of having a house in trust before making a binding decision. Here, the main advantages and drawbacks.

Benefits of a Trust

Bypassing the hassle, delays, and costs associated with probate is a leading reason for using a trust.

Probate expenses can vary by location and the size of the estate but traditionally include legal fees, executor fees, appraisal fees, and other administrative costs. While probate costs will vary depending on the size of the estate and the state you live in, they can often be 3% to 7% of the estate or more.

You may also want to avoid probate to keep the details of your estate private. Probate is a public process that can reveal your estate’s worth and chosen beneficiaries.

Trusts are also useful tools for providing a financial safety net for children in the unexpected event that both parents die. A trustee manages the assets on behalf of any minor beneficiaries. Terms can be set to transfer control of assets held in the trust to children when they reach a certain age.

Putting certain assets in a trust could help some seniors qualify for Medicaid. If you’re 65 or older, your home and furnishings are usually exempt from the asset limit to qualify, but the threshold is low: around $2,000 in most states.

Disadvantages of a Trust

Setting up a trust can be complex. There are usually more costs in creating a trust than a will.

With a revocable trust, you need to track income from assets held in the trust to report on your personal tax returns. If you designate a third-party trustee to manage the trust, maintenance costs could add up over time.

And if you put just your home in a trust, your other assets will still be subject to the probate process.

When a house is the only large asset, buying a house from a family member is a possible alternative. Though this can be contentious among relatives, it’s another option to pass on a valuable asset to the family while providing some financial security.

The Takeaway

Estate planning isn’t always easy. Putting your house in a trust is one strategy to reduce the time and costs associated with inheritance. Probate costs can eat up 3% to 7% of an estate, and putting assets into a trust can help avoid that. Even if you put a house in a trust, however, you are still liable for any mortgage payments due, which you may be able to lower via refinancing.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What are the disadvantages to putting your house in a trust?

There are some disadvantages to putting your home in a trust. Getting the trust set up and making sure it is being properly maintained can be expensive and complicated. With a trust, you will lose some control over your home, even with a revocable trust, but especially with an irrevocable one. And putting your home in a trust won’t prevent the rest of your estate from going through probate.

Can I put my house in a trust if it’s not paid off?

Yes, you can put your house in a trust even if you still have a balance on the mortgage. However, there is a specific process you’ll need to follow, and you will probably need to get permission from your lender. Your mortgage may have a “due on sale” clause, which means that the lender will ask you for full payment when you transfer the house’s title, so working with your lender may also help you avoid that. After that, you’ll have to transfer the title of the home to the trust and figure out how to manage insurance and any other liabilities.

Why do people put their house in a trust?

Often, people put their house in a trust to avoid the time and expense of having the home go through probate after their death. A trust can also help ensure continuity of the management of your house if you become incapacitated since your successor trustee would take over the management as needed.

Photo credit: iStock/BrianAJackson

SOHL-Q225-174

An interest-only mortgage lets you pay just interest for a set period of time, typically up to 10 years, as opposed to paying interest plus principal from the beginning of the loan term.

While interest-only mortgages can mean lower payments for a while, they also mean you aren’t building up equity (ownership) in your home. Plus, you will likely have a big jump in payments when the interest-only period ends and you are repaying both interest and principal.

Read on to learn how interest-only mortgages work, their pros and cons, and who might consider getting one.

Note: SoFi does not offer interest only mortgages at this time. However, SoFi does offer conventional mortgage loan options.

How Do Interest-Only Mortgages Work?

With an interest-only mortgage, you make only interest payments for the first several years of the loan. During this time, your payments won’t reduce the principal and you won’t build equity in your home.

When the interest-only period ends, you generally have a few options: You can continue to pay off the loan, making higher payments that include interest and principal; you can look to refinance the loan (which can provide for new terms and potentially lower interest payments with the principal); or you can choose to sell the home (or use cash you’ve saved up) to fully pay off the loan.

Usually, interest-only loans are structured as a type of adjustable-rate mortgage (ARM). The interest rate is fixed at first, and then, after a specified number of years, the interest rate increases or decreases periodically based on market rates. ARMs usually have lower starting interest rates than fixed-rate loans, but their rates can be higher during the adjustable period. Fixed-rate interest-only mortgages are rare.

An interest-only mortgage typically starts out with a lower initial payment than other types of mortgages, and, depending on your loan conditions, you can stick with those payments as long as 10 years before making any payments toward the principal. However, you typically end up paying more in overall interest than you would with a traditional mortgage.

Interest-Only Loan Pros and Cons

Before you choose to take out an interest-only mortgage, it’s a good idea to carefully weigh both the benefits and drawbacks.

Pros

•  Lower initial payments The initial monthly payments on interest-only loans tend to be significantly lower than payments on other mortgages, since they don’t include any principal.

•  Lower interest rate Because interest-only mortgages are usually structured as ARMs, initial rates are often lower than those for 30-year fixed-rate mortgages.

•  Frees up cash flow With a lower monthly payment, you may be able to set aside some extra money for other goals and investments.

•  Delays higher payments An interest-only mortgage allows you to defer large payments into future years when your income may be higher.

•  Tax benefits Since you can deduct mortgage interest on your tax return, an interest-only mortgage could result in significant tax savings during the interest-only payment phase.

Cons

•  Costs more overall Though your initial payments will be smaller, the total amount of interest you will pay over the life of the loan will likely be higher than with a principal-and-interest mortgage.

•  Interest-only payments don’t build equity You won’t build equity in your home unless you make extra payments toward the principal during the interest-only period. That means you won’t be able to borrow against the equity in your home with a home equity loan or home equity line of credit.

•  Payments will increase down the road When payments start to include principal, they will get significantly higher. Depending on market rates, the interest rate may also go up after the initial fixed-rate period.

•  You can’t count on refinancing If your home loses value, it could deplete the equity you had from your down payment, making refinancing a challenge.

•  Strict qualification requirements Lenders often have higher down payment requirements and more rigorous qualification criteria for interest-only mortgages.

💡Quick Tip: When house hunting, don’t forget to lock in your mortgage loan rate so there are no surprises if your offer is accepted.

Who Might Want an Interest-Only Loan?

You may want to consider an interest-only mortgage loan if:

•  You want short-term cash flow A very low payment during the interest-only period could help free up cash. If you can use that cash for another investment opportunity, it might more than cover the added expense of this type of mortgage.

•  You plan to own the home for a short time If you’re planning to sell before the interest-only period is up, an interest-only mortgage might make sense, especially if home values are appreciating in your area.

•  You’re buying a retirement home If you’re nearing retirement, you might use an interest-only loan to buy a vacation home that will become your primary home after you stop working. When you sell off your first home, you can use the money to pay off the interest-only loan.

•  You expect an income increase or windfall If you expect to have a significant bump up in income or access to a large lump sum by the time the interest period ends, you might be able to buy more house with an interest-only loan.

Recommended: Tips for Shopping for Mortgage Rates

Qualifying for an Interest-Only Loan

Interest-only loans aren’t qualified mortgages, which means they don’t meet the backing criteria for Fannie Mae, Freddie Mac, or the other government entities that insure mortgages. As a result, these loans pose more risk to a lender and, therefore, can be more difficult to qualify for.

In general, you may need the following to get approved for an interest-only loan:

•  A minimum credit score of 700 or higher

•  A debt-to-income (DTI) ratio of 43% or lower

•  A down payment of at least 20%

•  Sufficient income and assets to repay the loan

The Takeaway

An interest-only mortgage generally isn’t ideal for most homebuyers, including first-time homebuyers. However, this type of mortgage can be a useful tool for some borrowers with strong credit who fully understand the risks involved and are looking at short-term ownership or have a plan for how they will cover the step-up in payment amounts that will come down the road.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

When should you use an interest-only mortgage?

There are several situations in which it may make sense for homebuyers to consider an interest-only mortgage. If they are anticipating a windfall or increase in income before the initial interest-only period is up, these loans could allow them to buy a more expensive house. If they’re looking for a second home to retire to, they can eventually use the proceeds from the sale of their primary home to pay off principal. And if they plan to move and sell the house before the interest-only period ends, an interest-only loan may be practical.

What is a main disadvantage of an interest-only loan?

Interest-only loans have several potential disadvantages. Most notably, borrowers typically end up paying more interest over the life of the loan than they would with other loans, they do not build home equity during the initial, no-interest period, and when they do start paying principal, the size of the payments may be larger than they anticipated.

Do banks still do interest-only mortgages?

Not all banks offer interest-only mortgages, but some do. Be aware that banks that offer the loans may have more demanding criteria for borrowers, like a credit score of 700 or more, a DTI ratio of 43% or less, and a down payment of at least 20%.

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SOHL-Q225-068

Dividend yield concerns how much an investor realizes from their investments over the course of a year as a result of dividends. Dividends, which are payouts to investors as a share of a company’s overall profit, can help investors generate bigger returns, and some investors even formulate entire strategies around maximizing dividends.

But it’s important to have a good understanding of dividends, dividend yields, and other related concepts before going too far into the weeds.

What Is Dividend Yield?

A stock’s dividend yield is how much the company annually pays out in dividends to shareholders, relative to its stock price. The dividend yield is a financial ratio (dividend/price) expressed as a percentage, and is distinct from the dividend itself.

Dividend payments are expressed as a dollar amount, and supplement the return a stock produces over the course of a year. For an investor interested in total return, learning how to calculate dividend yield for different companies can help to decide which company may be a better investment.

But bear in mind that a stock’s dividend yield will tend to fluctuate because it’s based on the stock’s price, which rises and falls. That’s why a higher dividend yield may not be a sign of better value.

How Does Dividend Yield Differ From Dividends?

It’s important to really drive home the difference between dividend yield and dividends in general.

Dividends are a portion of a company’s earnings paid to investors and expressed as a dollar amount. Dividends are typically paid out each quarter (although semi-annual and monthly payouts are common). Not all companies pay dividends.

Dividend yield, on the other hand, refers to a stock’s annual dividend payments divided by the stock’s current price, and expressed as a percentage. Dividend yield is one way of assessing a company’s earning potential.

How to Calculate Dividend Yield

Calculating the dividend yield of an investment is useful for investors who want to compare companies and the dividends they pay. For investors looking for investments to help supplement their cash flow, or even to possibly live off dividend income, a higher dividend yield on a stock would be more attractive than a lower one.

What Is the Dividend Yield Formula?

The dividend yield formula is more of a basic calculation than a formula: Dividend yield is calculated by taking the annual dividend paid per share, and dividing it by the stock’s current price:

Annual dividend / stock price = Dividend yield (%)

How to Calculate Annual Dividends

Investors can calculate the annual dividend of a given company by looking at its annual report, or its quarterly report, finding the dividend payout per quarter, and multiplying that number by four. For a stock with fluctuating dividend payments, it may make sense to take the four most recent quarterly dividends to arrive at the trailing annual dividend.

It’s important to consider how often dividends are paid out. If dividends are paid monthly vs. quarterly, you want to add up the last 12 months of dividends.

This is especially important because some companies pay uneven dividends, with the higher payouts toward the end of the year, for example. So you wouldn’t want to simply add up the last few dividend payments without checking to make sure the total represents an accurate annual dividend amount.

Example of Dividend Yield

If Company A’s stock trades at $70 today, and the company’s annual dividend is $2 per share, the dividend yield is 2.85% ($2 / $70 = 0.0285).

Compare that to Company B, which is trading at $40, also with an annual dividend of $2 per share. The dividend yield of Company B would be 5% ($2 / $40 = 0.05).

In theory, the higher yield of Company B may look more appealing. But investors can’t determine a stock’s worth by yield alone.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Dividend Yield: Pros and Cons

For investors, there are some advantages and disadvantages to using dividend yield as a metric that helps inform investment choices.

Pros

•   From a valuation perspective, dividend yield can be a useful point of comparison. If a company’s dividend yield is substantially different from its industry peers, or from the company’s own typical levels, that can be an indicator of whether the company is trading at the right valuation.

•   For many investors, the primary reason to invest in dividend stocks is for income. In that respect, dividend yield can be an important metric. But dividend yield can change as the underlying stock price changes. So when using dividend yield as a way to evaluate income, it’s important to be aware of company fundamentals that provide assurance as to company stability and consistency of the dividend payout.

Cons

•   Sometimes a higher dividend yield can indicate slower growth. Companies with higher dividends are often larger, more established businesses. But that could also mean that dividend-generous companies are not growing very quickly because they’re not reinvesting their earnings.

Smaller companies with aggressive growth targets are less likely to offer dividends, but rather spend their excess capital on expansion. Thus, investors focused solely on dividend income could miss out on some faster-growing opportunities.

•   A high dividend yield could indicate a troubled company. Because of how dividend yield is calculated, the yield is higher as the stock price falls, so it’s important to evaluate whether there has been a downward price trend. Often, when a company is in trouble, one of the first things it is likely to reduce or eliminate is that dividend.

•   Investors need to look beyond yield to the type of dividend they might get. An investor might be getting high dividend payouts, but if they’re ordinary dividends vs. qualified dividends they’ll be taxed at a higher rate. Ordinary dividends are taxed as income; qualified dividends are taxed at the lower capital gains rate, which typically ranges from 0% to 20%. If you have tax questions about your investments, be sure to consult with a tax professional.

The Difference Between Dividend Yield and Dividend Rate

As noted earlier, a dividend is a way for a company to distribute some of its earnings among shareholders. Dividends can be paid monthly, quarterly, semi-annually, or even annually (although quarterly payouts tend to be common in the U.S.). Dividends are expressed as dollar amounts. The dividend rate is the annual amount of the company’s dividend per share.

A company that pays $1 per share, quarterly, has an annual dividend rate of $4 per share.

The difference between this straight-up dollar amount and a company’s dividend yield is that the latter is a ratio. The dividend yield is the company’s annual dividend divided by the current stock price, and expressed as a percentage.

What Is a Good Dividend Yield?

Two companies with the same high yields are not created equally. While dividend yield is an important number for investors to know when determining the annual cash flow they can expect from their investments, there are deeper indicators that investors may want to investigate to see if a dividend-paying stock will continue to pay in the future.

A History of Dividend Growth

When researching dividend stocks, one place to start is by asking if the stock has a history of dividend growth. A regularly increasing dividend is an indication of earnings growth and typically a good indicator of a company’s overall financial health.

The Dividend Aristocracy

There is a group of S&P 500 stocks called Dividend Aristocrats, which have increased the dividends they pay for at least 25 consecutive years. Every year the list changes, as companies raise and lower their dividends.

Currently, there are 65 companies that meet the basic criteria of increasing their dividend for a quarter century straight. They include big names in energy, industrial production, real estate, defense contractors, and more. For investors looking for steady dividends, this list may be a good place to start.

Dividend Payout Ratio (DPR)

Investors can calculate the dividend payout ratio by dividing the total dividends paid in a year by the company’s net income. By looking at this ratio over a period of years, investors can learn to differentiate among the dividend stocks in their portfolios.

A company with a relatively low DPR is paying dividends, while still investing heavily in the growth of its business. If a company’s DPR is rising, that’s a sign the company’s leadership likely sees more value in rewarding shareholders than in expanding. If its DPR is shrinking, it’s a sign that management sees an abundance of new opportunities abounding. In extreme cases, where a company’s DPR is 100% or higher, it’s unlikely that the company will be around for much longer.

Other Indicators of Company Health

Other factors to consider include the company’s debt load, credit rating, and the cash it keeps on hand to manage unexpected shocks. And as with every equity investment, it’s important to look at the company’s competitive position in its sector, the growth prospects of that sector as a whole, and how it fits into an investor’s overall plan. Those factors will ultimately determine the company’s ability to continue paying its dividend.

The Takeaway

Dividend yield is a simple calculation: You divide the annual dividend paid per share by the stock’s current price. Dividend yield is expressed as a percentage, versus the dividend (or dividend rate) which is given as a dollar amount. The dividend yield formula can be a valuable tool for investors, and not just ones who are seeking cash flow from their investments.

Dividend yield can help assess a company’s valuation relative to its peers, but there are other factors to consider when researching stocks that pay out dividends. A history of dividend growth and a good dividend payout ratio (DPR), as well as the company’s debt load, cash on hand, and credit rating can help form an overall picture of a company’s health and probability of paying out higher dividends in the future.

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