About: Liza Weiman Hanks

Recent Posts by Liza Weiman Hanks

Can I Put My House Into a Living Trust if There’s a Mortgage?

houseDear Liza: Can real estate that still has a mortgage on it be placed in a trust? Yes, you can place real property with a mortgage into a revocable living trust. That is, in fact, quite common. Most people, after all, don’t own their houses free and clear when they set up their living trusts. But transferring real property into the trust does not change your obligation to continue to pay the mortgage–if you don’t pay, they can still take back the house. And, if you refinance the house at some future time, the lender may ask you to take the house out of the trust to get the new loan, then put it back in. This is annoying, but not a deal-breaker. Not all lenders require this, but many do.

Federal legislation passed in the 1980’s (the Garn-St. Germain Depository Institutions Regulation Act) says that the transfer of real property into a revocable living trust does not trigger what’s called a ‘due on sale’ clause in a mortgage–which would allow the lender to demand that you repay the loan in full, as if you’d sold the property to a new owner.

So, to summarize, it’s fine to put your house into a revocable trust to avoid probate, even if that house is subject to a mortgage.

What Kind of Tax ID Do I Need for a Trust?

Dear Liza: My parents both have recently passed away. They had a revocable trust.  What type if tax ID do I need?  I created one for the “Estate” type, but should I have made it for the “Trust” type? I am the trustee.  Getting a new tax identification number for a trust that has become irrevocable due to the death of the settlor is a task every new Trustee has to face. The trust needs a new tax identification number to report income earned from the date of death of the settlor to the time when when the trust is distributed to the beneficiaries.

After the last settlor dies, you can’t use their Social Security Number any longer (because they’re dead), so you have to get a new tax id. It sounds like you went online to get the tax id from the IRS. You are right, you should have asked for the number to be set up for an irrevocable trust, not an estate. Don’t panic though, just follow the instructions here to correct that error.

For more information on how to deal with taxes and other trust administrative issues, the Trustee’s Legal Companion (which I co-wrote) is a great resource (honest, it is). For a step-by-step guide to getting an EIN, go to Legal Consumer.com. You’ll find free inheritance law information (which I wrote, too) for all states except Louisiana–just enter your zipcode and look for the article entitled “How to Get a Tax ID number.”

Annual Gifts: $14,000 each to as many people as you’d like

Dear Liza: If my mom gifts $14,000 to me and my 5 children and does this by writing each individual separate checks for $14,000 which are then deposited in each separate child’s account, will it also be deemed a gift to me if I am a joint owner? Probably not. Your mom can give up to $14,000, per year, to you, each of your five children, and everyone who lives in Miami, if she’d like to. As long as none of these gifts exceeds that annual gift limit (currently $14,000), she doesn’t need to report this on a gift tax return. However, since these gifts are to be deposited into joint accounts and you are a co-owner, make sure NOT to withdraw money from these accounts for your own use. If you withdraw money from these accounts for your own use, it could be considered a deemed gift from your mother to you–and, since you’ve already received a gift of $14,000, that extra gift would need to be reported. Your mother wouldn’t owe any gift tax on that gift, she’d just use up some of her $5,450,000 lifetime exclusion from the tax, but it would still be an extra return to prepare and file.

Better yet, why not just open up custodial accounts for each of the kids, and put these annual gifts in those accounts? You can be the custodian for each account and use the money for your children’s benefit without any concern about a withdrawal being deemed a gift from your mother to you.

Trust Tax ID Numbers and Other Basics of Trust Administration


Dear Liza: My mother recently died and I am the Trustee of her trust. She left everything to me and my brother, equally.  I live far away from California, where she lived. My brother lives in her house. The bank told me that I need to get a tax identification number for my mother’s trust, is that true? Also, I’m worried that my brother is going to take her furniture and other things in the house before I have the chance to get there. I really don’t know where to start or how to get help. So, first things first. Yes, you DO need to get a tax identification number for your mother’s trust now that she’s died. That’s because now her trust is irrevocable, and, until you distribute the trust property to yourself and your brother, any income earned by the trust during this interim period needs to be reported under this new tax identification number, which is called an ‘EIN’ (employee identification number). You can apply for it online at this website. I’ve written about how to do this on Legal Consumer, which offers national probate information, organized by zip code–click on the article about how to get a tax id number.

Next, you, as Trustee, are responsible for gathering and protecting the trust’s assets until they are distributed to the beneficiaries. That’s the legal answer — but in real life, this can be tricky, especially when you are far away and you two are the only beneficiaries. I would advise seeing how cooperative your brother will be — after all, he benefits from having the house clean and sold for a good price. Ultimately, if he won’t cooperate and you can’t get him to move out, you should seek to have him removed by the local law enforcement authority, but I would hope it doesn’t come to that.

Finally, in terms of getting help, I’d advise you go find an estate planning attorney to advise you on your duties as Trustee. If there are trust assets other than that house, you can use trust money to pay for this advice, and it will be well worth it, since you have to do the job properly or risk personal liability. Nolo has a lawyer directory that should be helpful here.

Beneficiary Designations Are the Last Word

Dear Liza: My Stepmother had a pension, my father was the beneficiary after she died. He made me beneficiary after his death. After he died, I received the pension. Now my stepmother’s sister wants it. She is not a beneficiary. Is she entitled to it? Can she try to fight it?  Your stepmother’s sister, based on what you’ve written here, is not entitled to that pension. If she isn’t the named beneficiary, she’s not entitled to the money. It’s that simple. When an account or a pension has a named beneficiary, that beneficiary is the only person entitled to that asset. Period. Unless your father didn’t have the right to name a beneficiary after his death, or was somehow named improperly by your stepmother, no one else but you would be entitled to the money. In other words, if a beneficiary is improperly designated, then that beneficiary designation itself can be challenged. But otherwise, the account holder’s designation of a beneficiary is the last word.

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