Trusts and Mortgages- Can I Legally Put My Home in a Trust?

At LegacyGuard Legal, we frequently advise our clients to establish Trusts as part of their overall Estate Plans.  A major benefit of setting up a Trust is that it acts similarly to a Will, distributing your assets after your death. However, Trusts also offer additional advantages when it comes to managing your assets during your lifetime.

One common question we encounter is whether a home with an existing mortgage can be transferred into a Trust. The answer is yes!  Even if your property is mortgaged, you can place it in a Trust, though there are a few details to keep in mind.

Understanding Trusts

A Trust is a legal entity that holds the title to property placed in it. As the Grantor, or person who gives property to the Trust, you transfer ownership of your property to the Trust.  Don’t worry!  As the Trustee, you still manage and control the property, provided the Trust is revocable. A revocable Trust allows you to add or remove assets, and even dissolve the Trust entirely, as long as you’re alive. The Trust typically becomes irrevocable upon your death or the death of your spouse, if you’re married, unless you specify otherwise.

Mortgages and Ownership

While you own your home, the lender has a lien on it due to the mortgage.  As such, lenders have certain rights, like ensuring mortgage payments are made, that the property taxes are paid, and that you maintain adequate insurance.  When you transfer a home into a Trust, this process usually requires additional paperwork with your lender, but it’s a fairly standard procedure, and many lending documents already account for this scenario.

Lenders primarily care about protecting their financial interest in the property.  While placing your home in a Trust might require their approval, this sort of transfer does not equate to a sale or gift, so lenders usually permit such transfers.  However, there may be specific requirements, often dictated by guidelines such as those from Fannie Mae, which outline how a mortgaged property can be placed into a Trust.

Refinancing While in a Trust

If your home is in a Trust and you later wish to refinance the mortgage, it’s still possible. Some lenders may require that the property be temporarily removed from the Trust before refinancing, but this can easily be done with a revocable Trust.  Once refinancing is complete, the home can be transferred back into the Trust.

Moving Forward with LegacyGuard Legal

At LegacyGuard Legal, we ensure that our clients’ Trusts are properly funded and assets are correctly transferred.  Whether you are considering putting your home or other assets into a Trust, we’ll guide you through the legal process and work with your lender to ensure everything is fully legal.

If you have questions about Trusts or are ready to create a comprehensive Estate Plan, reach out to LegacyGuard Legal today.