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Can you Convey the Title to your House to your Revocable Trust?

Can you Convey the Title to your House to your Revocable Trust?

            People usually setup a Revocable Trust to protect their assets; either for the management of their assets in the event they are incapacitated or for the purpose of avoiding costly probate.  One of the questions that always needs to be answered is: can a house be conveyed into the Revocable Trust without any problems?  The main concern people have is the calling of the mortgage (“Balloon Payment”) on their house.

            The question hinges on the facts of title ownership and the type of mortgage on the property.  If this property has title ownership that matches that of the Revocable Trust, i.e. a primary house in your and your spouse’s names and the Revocable Trust is in you and your spouse’s names, then there would likely be no issues in that regard.  Likewise, if the primary house has a regular mortgage (not a reverse mortgage, home equity line of credit, etc.) and you are transferring it into a Trust in your and your spouse’s names, then there would likely be no issues in that regard.  This is because of a specific section of the Garn-St. Germain Depository Institutions Act of 1982, indicating that such a conveyance does not qualify as a “transfer”, and further will not trigger a due on sale clause as identified in the mortgage documentation.

            Problems arise when the situation does not match the scenario listed above.  If the house you own is not your primary house, then as a general rule, the conveyance does not qualify for the exception in the Garn-St. Germain Act, and the conveyance needs to be approved by the current holder of the mortgage – either by signing off on the deed or providing a letter of consent authorizing the conveyance.  Some mortgage holders are quick to provide consent to the conveyance, while others are slow to provide consent.  It is important to note that the mortgage holder is not required to agree to any conveyance of the house under the Garn-St. Germain Act, rather the act merely carves out exceptions to the Balloon Payment.  If the conveyance takes place and the mortgage holder does not consent in such a scenario, the Balloon Payment can be demanded.

It is highly advisable to discuss with a competent attorney to draft the Revocable Trust.  Call our office today at 540-443-9255, or email at [email protected] to discuss your estate planning needs with an experienced estate planning attorney.