A common question clients ask during initial meetings concerns what implications, if any, a mortgage on their property would have if they transferred that property into a living trust. After all, most people do not own their homes “free and clear” until later in life, if at all. The bottom line is that having a mortgage on your home does not and should not adversely impact your estate plan or the need for such planning.
First and foremost, Federal legislation passed in 1982 (Garn-St. Germain Depository Institutions Regulation Act) states that the transfer of real property into a revocable living trust does not trigger a “due on sale” clause that allows lenders to foreclose on a mortgage. In other words, a mortgage you may have on your home will not be impacted by a transfer to trust.
One potential situation that can be viewed as more of a headache than a hindrance relates to refinancing a mortgage. Some – but not all – mortgage lenders will not refinance property owned in trust. This is a simple fix, however. If a lender requires you to remove the property from trust before refinancing, then after the refinancing process is complete, the property can be placed back into your trust. This process would only require to deed transfers at the county recorder’s office.
The attorneys at Wiggins & Hall Law Group, LLC are experienced with estate planning, particularly living trusts. To schedule a free initial consultation with an attorney, give our team at Wiggins and Hall, LLC a call today. We have offices in Dayton, Ohio and Lexington, Kentucky.