Dear Liza: Can we put our house into a living trust if we have a mortgage? Yes, you most certainly can. Almost everyone who does a living trust also has a mortgage. Federal law prohibits a lender from accelerating your loan (as in saying “pay up now”) if you transfer your home into a living trust. The only time having a mortgage and a trust can be a hassle is if you refinance — some lenders will require you to take the house out of your trust to get the new loan. Then, after the new loan is funded, you’ll have to put the house back in to the trust. It’s not really hard to do, but you have to record a deed for both steps: taking the house out and putting it back in. Sometimes your title officer can do it. Sometimes my clients will call me and ask my office to put their house back into the trust for them.
Tag Archives: living trusts
Hi Liza, Please explain/define the differences between trusts. Specifically, what is a living trust, a revocable trust, and an irrevocable trust. Advantages? Disadvantages? Here’s my answer for you: a LIVING trust and a REVOCABLE trust are almost always the same thing. Both are ways to describe a trust that holds assets during the lifetime of the person who established the trust ( the “Grantor”) for that person’s lifetime benefit (the Grantor is also the trust “Beneficiary”). It’s a living’ trust because it is established during the Grantor’s lifetime. It is revocable because during the Grantor’s lifetime they can revoke it any time they want to. A revocable living trust’s purpose is simply to avoid a probate of the trust’s assets after the Grantor dies. Instead of having to go through a court supervised probate proceeding (which costs money and takes time), the person named to manage the trust after the Grantor (the “Successor Trustee”) simply settles the estate as the trust directs (this also can cost money and certainly takes time, but usually less of both).
An IRREVOCABLE trust is a trust that can’t be amended or revoked once it is established. These are usually used when a person wants to give away money or other assets to another person, subject to certain terms that they don’t want to be changed. Once the gift is made to the trust, that person no longer owns those assets, which can be a tax advantage. But such a trust can’t be changed without going to court and they can’t get the gift back, ever. Sorry to get long-winded on you, but my answer wouldn’t be complete without letting you know that after the Grantor of a revocable trust dies, that trust then becomes an irrevocable trust, because no one can change it’s terms after the Grantor’s death.
Dear Liza, My Wife and I own two pieces of real-property that we purchased long ago, in Los Angeles. Because of Prop. 13, our property taxes are quite low. If we pass these properties to our children via a living trust, will they have to pay more property taxes? NO! I love being able to give you a simple, happy answer. But, you are in luck. By placing these properties into a living trust, you will be able to pass them to your children without a costly probate proceeding AND because you are passing properties from a parent to a child, they will inherit your property tax rate in both properties! The transfer of real property from parents to children is currently an exception to Property 13 reassessment. Your children will have to file a form requesting that this exception be applied to the properties within three years of the transfer, but unless the law changes in CA, they won’t be reassessed. For those of my readers who do not live in California, I apologize, this is a completely state-specific blog post. California passed Prop. 13 in the 1970″s, limiting the amount of property tax that’s assessed on real property until there’s a new owner, at that point, the property tax is applied to the then-current value of the property. However, parent-to-child is one of a few exceptions to this rule.