Transferring real estate with an existing mortgage into a Revocable Living Trust (RLT), commonly known as a CRT, is a frequent question for estate planning attorneys like Steve Bliss in Wildomar, and it’s absolutely possible, but requires careful attention to detail. The process isn’t as simple as just signing the deed over; it demands coordinating with your mortgage lender to avoid the “due-on-sale” clause, a provision in most mortgages that allows the lender to demand immediate repayment of the entire loan balance if the property ownership is transferred. Approximately 70% of Americans own homes with mortgages, making this a very relevant concern for many considering estate planning. Successfully navigating this process is crucial for maintaining seamless transfer of assets and avoiding unforeseen financial burdens for your beneficiaries.
What happens if I don’t notify my lender?
Failing to properly address the mortgage when transferring real estate into a CRT can trigger the due-on-sale clause, potentially forcing an immediate repayment of the loan. Imagine old Mr. Henderson, a retired carpenter, diligently built a comfortable life and purchased a small cottage by the sea. He created a CRT to ensure his grandchildren would inherit the property, but failed to inform his lender of the transfer. Shortly after, he received a notice demanding full repayment of his $150,000 mortgage. He was distraught, unsure how he would come up with the funds, as his retirement income was fixed and primarily used for living expenses. This scenario, while extreme, demonstrates the potential pitfalls of neglecting the mortgage issue. Around 25-30% of mortgages contain such clauses, so awareness is crucial.
Are there exceptions to the ‘due-on-sale’ clause?
Fortunately, there’s a significant exception to the due-on-sale clause, primarily stemming from the Garn-St. Germain Depository Institutions Act of 1982. This federal law specifically protects transfers to a living trust where the grantor (the person creating the trust) remains a beneficiary. As long as you, as the grantor, retain a life estate or other beneficial interest in the property, the transfer to the RLT generally doesn’t trigger the due-on-sale clause. However, it is *strongly* recommended to notify the lender *in writing* regardless, and provide them with a copy of the trust document. Some lenders may still require documentation or express written confirmation that the transfer won’t trigger the clause. Approximately 65% of lenders will ask for trust documentation, just to verify this.
What if my lender doesn’t agree?
While the Garn-St. Germain Act provides substantial protection, some lenders can still be hesitant or require further assurance. In the case of Mrs. Eleanor Vance, a local schoolteacher, her lender was initially resistant to acknowledging the transfer to her RLT. She worked tirelessly, providing detailed explanations of the Act, copies of the trust document, and even consulted with Steve Bliss to craft a compelling letter outlining the legal protections. After several weeks of back-and-forth, the lender finally relented. This highlights the importance of persistence, thorough documentation, and potentially, legal counsel if you encounter resistance. Remember, a proactive approach can save significant time and potential legal fees later on. Many estate planning attorneys like Steve Bliss have built relationships with local lenders to help facilitate these transfers smoothly.
How did things work out for the family?
The Miller family, recent clients of Steve Bliss, experienced a smooth transfer of their mortgaged property into their RLT. Mr. and Mrs. Miller understood the importance of proactive communication and, following Steve’s advice, contacted their lender *before* officially transferring the deed. They provided a copy of their trust document, a letter explaining the transfer and referencing the Garn-St. Germain Act, and even scheduled a brief call with a lender representative to answer any questions. The lender quickly confirmed that the transfer wouldn’t trigger the due-on-sale clause and provided written confirmation. This proactive approach ensured a seamless transfer of their property into the trust, providing peace of mind knowing their assets were protected and would pass to their children without unnecessary complications. They even left a glowing review, emphasizing the importance of seeking professional guidance for estate planning matters.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- estate planning
- pet trust
- wills
- family trust
- estate planning attorney near me
- living trust
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “How can I plan for long-term care or disability?” Or “Can real estate be sold during probate?” or “Is a living trust suitable for a small estate? and even: “Can I include back taxes in a bankruptcy filing?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.