“I’m Updating My Estate Plan—Do I Have to Pay Taxes to Get Property Out of My Trust?”

You created a trust years ago.
Maybe your kids were young, your assets were complex, or you just wanted to avoid probate.

But now, things have changed.
✅ The kids are grown.
✅ You’ve downsized.
✅ Your estate is simpler.

You and your lawyer decide: You don’t need the trust anymore.
So… what happens if you take the house, the cabin, or any other property out of the trust and put it back into your name?

Are you triggering taxes? Fees? A penalty from the IRS?

Let’s break it down.

🔍 First Things First: What Kind of Trust Was It?

We’re talking about a revocable living trust—the kind most people create for probate avoidance and family planning.

If the trust was revocable, and you were the trustee (or your spouse was), then legally speaking:
👉 You already owned the assets.
The trust was just a container. You controlled it. You could amend or revoke it any time.

So when you take something out of the trust, you’re not selling it to someone else or giving it away.
You're just moving it from one bucket (the trust) back to your personal name.

💰 Does That Trigger Capital Gains Tax?

Nope.
Transferring property from your revocable trust to yourself doesn’t create a taxable event.

Capital gains taxes kick in when there’s a sale—not when you’re simply changing the title from “Trust of John Doe” to “John Doe.”

You don’t report that transfer to the IRS.
You don’t pay income tax on it.
You don’t get a surprise capital gains bill.

🧾 Do I Have to Pay Property Transfer Tax in Michigan?

Good question—and usually the answer is: no.

Michigan law includes an exemption from state and county transfer taxes when property is transferred from a revocable trust to the settlor (you).

👉 MCL 207.526(l) says it straight: no tax if the transfer is from a revocable trust to its creator.

But—and this matters—you may need to include the right language in your property transfer affidavit or deed to avoid getting hit with a transfer tax bill.

It’s one of those small legal details that gets expensive if you overlook it.

🏛️ What If You’re Removing Property Because the Trust Is Being Terminated?

Still fine. If you’re dissolving the trust because it’s no longer needed, and transferring the assets back to yourself (or to beneficiaries after your death), it usually doesn’t trigger tax either.

The only time you need to worry is if the property is sold as part of that process—or if the trust was irrevocable.

❌ When Do Taxes Actually Happen?

Let’s be clear:
🟠 Selling the property? Yep—capital gains tax may apply.
🟠 Gifting the property to someone else? Maybe—gift tax rules could apply.
🟠 Moving property from a trust you don’t control (like an irrevocable trust)? That’s different—definitely talk to an attorney.

But taking property out of your own revocable trust and putting it back in your name?
That’s a paperwork move—not a taxable one.

🛠️ Other Things You Might Need to Update

If you're dissolving your trust or simplifying your estate plan, don't forget to:

🟠 File a new deed correctly (warranty deed, quitclaim deed, etc.)
🟠 Update your will and power of attorney
🟠 Check beneficiary designations (life insurance, retirement accounts)
🟠 Cancel any unused trust tax ID numbers or bank accounts tied to the trust

And please—for the love of legal sanity—don’t do this by scribbling on old documents with a pen.

🧠 The Bottom Line

You can remove property from your revocable trust without triggering taxes—as long as it’s done right.

It’s one of those things that sounds complicated, but if you work with someone who knows what they’re doing, it’s quick, clean, and painless.

Just don’t go rogue with a quitclaim deed you found on Google.

📞 Let’s Simplify Your Plan

At Newburg Law, we help Michigan families and business owners keep their estate plans as simple or as strong as they need to be.

Whether you're dissolving a trust, retitling property, or just want to make sure your plan still works—we’ve got your back.

🟠 Straight answers
🟠 Smart strategy
🟠 No surprise tax letters

📲 Contact us today and let’s make it easy to move forward—with no hidden costs.