Real Estate and Living Trusts

“Nowhere are those with living trusts more often caught off guard and their estates forced into probate as is so often discovered that their new or re-financed real estate is not titled in their trust.”

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The Golden Rule & Vital Importance of Making Sure Your Real Estate Property Is Always Titled In Your Living Trust

It is best to begin this discussion about real estate property be reiterating the  “Golden Rule” of living trusts. That is, if you want your living trust to pass the assets then all of the property and assets that you own now — and any acquired in the future — must be titled and maintained in the name of your trust (except retirement plans). While following this rule is always wise, nowhere is it more vitally important than when it comes to real estate property — and nowhere do people get caught off guard more often (after they establish a trust) than with newly acquired or refinanced real estate. Read more below about the common mistakes many make with new and refinanced property.

What is Real Property? 

Generally, real property is any whole or partial ownership interest or right to land, whether or not there is a house or building on it. Oil and mineral rights are also a real property interest. Mobile homes are not a real property interest (but if you own the land it sits on that is a real property interest).

The Mortgage Holder Does Not Own The Property — You Do

Contrary to an often mistaken belief, you are the full legal owner of your real estate property, regardless of any outstanding loans used to purchase the property (or funds obtained through equity loans). The lender does not enjoy any ownership interest, but rather holds something similar to a lien against the property. Generally, the only known exception to this is a Cal-Vet loan and in rare instances where you are purchasing the property via a Land Sale Contract.

You Must Execute A Deed For Each Real Property Interest That You Own

Whether you now own 100% of a piece of real estate or, own a part interest as co-owner, it is vitally important that you execute a deed for each whole or part interest – conveying and transferring it to your trust. (This rule also applies to any whole or part interest that you acquire in the future.)

What Documents / Information You Need to Supply

To transfer your real estate to your trust requires you to furnish a copy of the deed (or have us obtain it) for each and every real estate property that you own (this includes partial interests and timeshares). Generally this is the deed (document) signed by the last owners which conveyed (transferred) the property to you – usually when you purchased the property. It is also possible that you received the property through a probated inheritance in which case you need to provide a copy of the final distribution order of the probate court. It is critical to arrive at any trust appointment with copies of your deeds, including the address for each piece of property as well as the property tax parcel number (APN, Assessors Parcel Number, etc.).

For A Minor Charge We Can Usually Obtain A Copy of The Deed

Thanks to evolving technology, in many (but not all) cases we can now obtain a copy of your deed form a service we subscribe to. The charge for this is generally under $15 per deed.

Beware: The Most Common Pitfalls & Mistakes With Real Estate & Living Trusts

Common Mistake #1: Forget to Title Newly Acquired Property in Trust.

Over time, people tend to acquire new real estate after they establish a trust (a new family home; a new investment; an inheritance; helping their children purchase a house, etc.). Problem is many times they forget to title or transfer their newly acquired property to their trust. The unfortunate and costly consequence to the family is often probate where the processes and costs for real estate are especially burdensome, drawn-out, and expensive. By its very nature real estate translates into higher probate fees since it tends to be the most valuable of assets – and remember, probate fees are calculated on the gross value not net (no deductions for mortgages, debts, or costs). In the final analysis, nothing triggers probate quicker, more often, and in such a major way as real estate. If you wish to avoid probate and for your trust to pass your property then you need to make sure that all of the real property that you own now and any you acquire in the future is properly tilted in the name of your trust by immediately executing and recording a deed transferring it to your living trust.

Common Mistake #2: Property Removed From Trust At Refinancing

By far the greatest risk to trust real estate is the refinancing process (even if you have previously put your property into your trust). That’s because many (if not most) lenders require the (loan) real property to be removed from the trust until the re-finance is completed. As a result countless properties are removed from living trusts every year.

In a perfect world everyone would sign and record a deed titling the property back to the trust immediately afterward– except that is not what is happening most of the time. In fact, with the primary focus on the refinance (not the trust) and in signing a dizzying number of documents, the removal from the trust tends to barely (if at all) register on people’s conscious radar. Even when it does it seems the overwhelming majority forget to put the property back into their trust. Again, the unfortunate consequence to the family is often probate where the process and costs for real estate are especially burdensome, drawn-out, and expensive. If this is the case (and you want your trust to pass your property) you definitely want to make absolutely certain you have executed and recorded a deed re-titling your real estate in your trust. If you have refinanced a property you should probably assume that the property is out of your trust if you are unable to verify otherwise. Unless you are able to confirm that the property is currently titled and recorded in your trust our advice is to execute and record a deed to your trust as soon as possible.

If you would like our help in transferring your property to your trust please download and submit our deed request package by clicking the button at the top of this page.