Trust funding and real estate
As I said last time, most trust funding is fairly easy but tedious. One exception: trust funding with real estate, which is tedious but not so easy. Why is that?
What we're trying to do in funding a living trust with real estate is to transfer ownership of the real estate to the trustee (or trustees -- in the case of many married couples, who own real estate jointly or as tenants by the entirety, the goal is to put one-half of the real estate into each spouse's living trust). This gets complicated because lots of entities besides the owners have an interest in their real estate. Such as...
1. Lender(s). Every mortgage I've ever seen includes a provision saying that the entire loan amount comes due upon a "transfer" of the underlying real estate. That language is intended to prevent you from selling a house but not paying off the mortgage. Obviously, there's no real concern with transferring a house from yourself individually to yourself as trustee, but in order to avoid problems, it's necessary to get lender approval for the transfer. This is made more difficult by the fact that most people employed by lenders don't understand what a living trust is, or what you are trying to do by transferring real estate to it. So you or your attorney will have to do some explaining.
2. Insurance folks. The insurance companies that provide your homeowners insurance and title insurance should be alerted to the fact that ownership of the real estate has changed.
Typically, I contact the lender, find out what they need to give their approval, and then submit it. Once approval is obtained, then the appropriate deeds conveying the property into trust are recorded. Then the insurance companies should be contacted with the information about the transfer.
