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Putting a House into a Revocable Living Trust

Once you have gone through the steps to create a revocable living trust for your estate plan, the next step is funding the trust. Funding involves transferring assets into the trust so that the trust "owns" the assets.

For many assets, like checking accounts, this may simply involve contacting the financial institution and changing the title to the account. However, for assets like real estate, the process is a little more involved.

Title to Real Estate

Title to real estate is conveyed by a deed. So when we are placing real estate into a trust, one way to accomplish this is by deeding the home into the trust. Specifically, the deed will say that you, John Smith, own the property and will be transferring it to John Smith (yourself) as Trustee of the John Smith Trust.

This deed will be recorded in land records for the City or County where the real estate is located. At that point, it is official. The real estate is now "in the trust."

How Does this Impact the Mortgage on my Home?

A Federal law called the Garmn-St Germain Depository Institutions Act of 1982 allows homeowners to transfer their home into a revocable living trust without triggering the due on sale clause in the loan. The due on sale clause essentially says that when a property has a mortgage, a change in title will accelerate the loan (or make the entirety of the outstanding loan balance immediately due). However, as long as the owner of the home is the beneficiary of the trust where the property is being transferred and the owner of the home continues to occupy the property, the due on sale clause does not apply.

If you are planning on refinancing your mortgage or obtaining a home equity line of credit (HELOC), then it may not be advisable to use a deed to transfer your home into a trust. This is because lenders can sometimes be reluctant to make a loan secured by a property in a trust. In some instances, the lender will go ahead and agree to make a loan, but can impose additional requirements that may be cumbersome.


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