How to Put Real Estate into Trust
Real Estate into Revocable Living Trust
If you have a revocable living trust and your house is titled in the name of the trust, please make certain it is properly funded. After establishing a revocable living trust, one of the most common blunders individuals make is to disregard to fund it.
People are always coming in to our office. They often want to update their estate planning. We talk about things just as if they have no estate planning at all. I want to know what you're doing and where you're coming from. I want to know why they are coming into our office. I want them to feel like they are coming into our office for the first time.
The reason I want to have that sort of discussion is to figure out what they truly want to achieve. I'd want to know what their estate planning goals are. I'd estimate that during those discussions, I discovered that less than half of their assets were truly in their revocable living trust.
They have neglected to fund their trust.
That means they have spent a lot of money and the document they got is not very useful.
Because they have not funded their trust, I talked about what it means to fund the trust in other videos on our YouTube channel. Basically, when you transfer something from your name to the name of a trust, that means that you are giving ownership of the asset to the trust.
A trust can own an asset. You are the trustee, but you still control the asset. Examples might include a bank account, property, or your house.
Most people's biggest asset is their home. But some people don't put it in a trust. People might think they can create a trust by downloading one off the internet, but that doesn't work.
Another reason is that they went to a lawyer and put their house in his living trust. Then when they sell their house, they don't put the new home in the living trust.
We've seen this happen a few times, and it's happened recently. We had a daughter come in after her father died. The father had created a living trust, but he forgot to include his house in it. He had put everything else into his trust except the house.
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Failed to Fund Trust
When he first created his trust 10-years ago, the home he owned at the time belonged to his trust. However, he decided to move to a small house. He was living in a house that is four thousand square feet, but then he moved into one that is only smaller. He bought a really nice little house.
He didn't call his estate planning lawyer or notify the title company, and so this lovely little cottage home was titled in his personal name rather than the trust's name. So we had to go through probate for one of the assets. The estate spent thousands of dollars on it.
If the house had simply been titled correctly from the start, it would have been an unneeded waste of money, costing thousands of dollars.
That is why I like to see my estate planning clients as soon as there is a shift in their financial or personal situation. As a result of a change, we will prepare a deed for the transfer of real property, such as your house into trust.
With a simple claim deed, you may transfer the property from its owner to the name of your revocable living trust.
For example, let's say that Carl and Cara are married and share ownership of their home. They come to the Cortes Law Firm, and we create a revocable living trust that is centered on an estate plan for them.
Quit Claim Deed to a Revocable Trust
We would also prepare a deed transferring that property from Carl and Cara as a married couple to the Carl and Cara Revocable Trust, which was created on December 23, 2021.
A warranty deed may also be used to transfer title, and some people might want to make sure their title is clear before selling their home. Not necessary most of the time, but some people want added peace of mind.
There are a few things to bear in mind regarding real estate transfers into your revocable living trust. If you have a mortgage on the house, then it might be good to check if there is a due-on-sale clause. This MIGHT be triggered if you transfer the property into your trust. These clauses usually do not apply to Trust because of a court decision. But you should consider them. Usually, mortgage companies are not worried about these clauses.
The next thing to consider is homeowners insurance. This isn't usually a big deal, but it does necessitate a phone call with your insurance agent to ensure that both you and the trust are covered by the policy.
The third item to consider is whether the property has a real estate exemption. This is generally not an issue if the deed is recorded correctly, with a memorandum of trust or certificate of trust.
However, it's worth phoning your taxing authority to ensure that the exemption isn't inadvertently lost during the transfer.
If you hire someone with expertise, they should make sure that your property is properly titled in the name of your trust. Then, whenever something changes in your personal or financial life, you should check with your revocable living trust lawyer to see whether it affects your property.
Remember, a revocable Living Trust is a living document that must evolve along with you.
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Cortes Law Firm
5801 Broadway Extension Hwy Suite 110
Oklahoma City, OK, 73118
405-213-0856