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Transferring Real Estate into a Trust – Step 2

by | Jan 2, 2024 | Estate Planning News

Transferring real estate to your Trust is an easy process if you know the correct steps to take. This blog is one of three on this process.

Transferring real estate typically requires signing a deed to transfer your interest in the property to the Trust and then recording that deed with the county.

The process varies a little by state. Each county can set its own requirements for how to format a deed, how to record a deed, and whether any other paperwork must be filed with the deed. Most states recognize several types of deeds, but “Quit Claim Deeds” or “Trust Transfer Deeds” are most commonly used to transfer property to a Trust in Colorado.

In our October 2023 blog, we discussed the first step to transferring real property into a living trust.  This second blog will discuss the importance of checking with your mortgage company on how to transfer the mortgage if the property is not owned outright.

When trying to determine if a mortgaged property can be transferred into a living trust, the initial place a trustee/grantor should look is the language of the mortgage documents themselves. When mortgaged property is transferred into a living trust, the mortgage holder’s lien will remain on the property unless the trust requires the mortgage documentation to be paid off before distribution to the beneficiary.

However, if the mortgage documents contain a “due on sale clause” , the mortgage holder  or mortgage company to demand full payment on the loan upon a transfer of interest. Applications of due on sale clauses arise when an owner sells his or her home, for obvious reasons when the property is transferred to a buyer the lender will demand payment from the seller.

The good news is that when the property is transferred into a living trust, a property whose mortgage documents contain a due on sale clause receive protection from The Garn St. Germain Act, a federal law which creates several exceptions in which a lender may not enforce the “due on sale” clause. The Garn St. Germain Act Garn exempts homeowners from a due on sale clause when the property is transferred into a living trust in which the borrower is and remains a beneficiary. The Garn St. Germain Act applies to residential one-to-four family homes and does not contain a provision as to whether the property must be owner-occupied.

To find out more about transferring real property into a trust, and how to complete this easy process, contact Anne McMichael at [email protected] or at 303-572-4211.

Sources: https://help.trustandwill.com