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- May 16, 2024
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Safeguarding Your Legacy: How to Transfer Property to Your Living Trust
Many people create living trusts to ensure that their assets do not go into probate in case something were to happen to them. The trust also allows them to specify how these assets should be distributed. If you are interested in why a trust should be created and how it can benefit you, read the following blog post I have written: Emma’s Legacy: A Tale of Planning and Protection.
The most important step immediately after creating the trust is to transfer your assets into the trust. For many people, their house is their biggest asset. They have many questions about how to transfer the house into the living trust and what the lender will do when they find out. I have tried to answer these questions in this blog post.
Transferring the property
Here are the steps in transferring a property into your Living Trust:
Obtain a grant deed form specific to your state/county. Here is a sample form from Los Angeles County. This is typically available from the county recorder’s office or online legal form providers. In the grant deed, you (the current owner) will be listed as the “Grantor” and your revocable living trust will be listed as the “Grantee”. The grantee should be listed as “Your Name, Trustee of the Your Name Revocable Living Trust dated XX/XX/XXXX”.
Provide the legal description of the property being transferred, which can be found on your current deed or property tax bill. Sign the grant deed in front of a notary public and have it notarized. The notary will verify your identity. Once signed and notarized, the grant deed must be recorded with the county recorder’s office or registry of deeds in the county where the property is located. This officially transfers ownership to the trust. You may need to pay a small recording fee to the county when submitting the deed.
The key steps are properly completing the grant deed form with the trust and property details, getting it notarized, and recording it with the county. An estate planning attorney can assist with preparing the deed correctly for your specific situation.
Dealing with the Lender
Most lenders will not object to transferring the property into a revocable living trust as long as you remain the trustee and beneficiary during your lifetime. If the ownership changes, then they might invoke the due-on-sale clause and ask for the entire remaining loan amount back. But as long as the ownership doesn’t change, they are unlikely to invoke the due-on-sale clause. This also means the beneficiary of the trust needs to be the same as the loan holder. If that is not exactly the same, the bank might not approve. Here are some lender’s websites that talk about transferring property into living trusts – Bank of America, Chase
You are typically required to notify the lender in writing about the transfer and the new titleholder (the trust). The lender may have specific requirements, such as providing them with a copy of the trust document and having you sign a document affirming the transfer will not impact your loan obligations.
LLC is not the same as Living Trust
Unlike a revocable living trust where the original borrower remains on the mortgage, transferring property to an LLC is considered an ownership change that violates most mortgage terms. Lenders see this as a transfer of the property to a separate legal entity, which increases their risk and allows them to call the loan due. So while transferring into a living trust is generally permitted by lenders, the same does not apply to transferring mortgaged property into an LLC without paying off the existing mortgage first.
Conclusion
So in summary, while transferring real estate into a revocable living trust is generally allowed, you must follow the proper procedures, record the deed, and notify your mortgage lender to avoid any issues. An experienced estate planning attorney can guide you through this process for your specific situation.
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