Many people going through the estate process to create a
living trust ask our law firm questions about what they can and cannot include. One
of the most common questions we receive is,
“Can I put my house in a living trust if there is still a mortgage
attached?”
The answer is, yes. In fact, it is very common for people to include property in a living
trust that still has a mortgage. Most people do not own their houses or
property at the time they create a living trust, so it is common to see
property with a mortgage added.
Things to Know Before Adding Your Home to a Trust
However, there are some important things to know if you plan on adding
a property with a mortgage to your living trust:
-
You must continue to pay your mortgage on the property. Adding your property to a trust does not remove your obligation to pay
that mortgage. If you don’t pay, you risk having your home taken
away from you.
-
Home loan lenders may ask you to remove the home from the trust if you
decide to refinance your home. You may be asked to remove the home from the trust until you receive the
new loan, then you will be free to add it back to the trust. Your lender
may not ask you to do this, but most do.
-
Putting your home into a revocable living trust does not impact the ‘due
on sale’ clause in a mortgage. Unlike if you sold the property to a new owner, a lender
will not demand you repay the full loan as a result of adding it to the trust.
Benefits of Transferring a Home to a Trust
The trust's beneficiaries are typically the homeowners, who then transfer
ownership to their children or loved ones after death
Some benefits of putting your home in a trust can include:
- Avoiding probate
- Protecting your home from creditors
- Minimizing taxes
If you have more questions or concerns about adding your property to a
living trust,
contact Thies & Lihn, PLLC and speak with one of our
Phoenix estate planning and
probate attorneys.