Estate planning often involves deciding what happens to your home after you’re gone. If you still have a mortgage on your house, you may be wondering: can a house with a mortgage be put in a trust? The short answer is yes — but there are important rules and steps to follow.
In this post, we’ll explain how it works, what type of trust to use, and what you need to consider before transferring a mortgaged property into a trust.
What Does It Mean to Put a House in a Trust?
Putting a house in a trust means legally transferring ownership from your name to the name of the trust. This allows the property to bypass probate and pass directly to your beneficiaries upon your death.
When a house has a mortgage, the process becomes more complex due to the lender’s involvement and legal protections like the due-on-sale clause .
Can You Put a House with a Mortgage in a Trust?
Yes, you can put a house with a mortgage into a trust , typically a revocable living trust . However, the mortgage must remain in your personal name, and you must continue making payments as usual.
Important considerations:
- Lenders cannot demand full repayment just because you placed the home in a revocable trust, thanks to the ** Garn–St. Germain Depository Institutions Act of 1982**.
- The trust must name you (or you and your spouse) as the trustee and beneficiary during your lifetime.
- Lenders may require notification or documentation about the trust, especially if refinancing or selling occurs later.
Types of Trusts for Mortgaged Homes
1. Revocable Living Trust
- Most common for estate planning
- Allows you to retain control and make changes
- Avoids probate while keeping the mortgage intact
2. Irrevocable Trust
- Not recommended for homes with mortgages unless under special circumstances (e.g., Medicaid planning or asset protection)
- Once transferred, you give up control, which may trigger issues with lenders
Steps to Transfer a Mortgaged Home Into a Trust
- Consult an Estate Planning Attorney – Ensure compliance with local laws and lender requirements.
- Prepare a New Deed – Transfer ownership from your name to the trust using a quitclaim or warranty deed.
- Record the Deed – File the new deed with your county recorder’s office.
- Notify Your Lender (Optional) – While not always required, some lenders appreciate being informed.
- Update Insurance and Titles – Make sure insurance and tax records reflect the change in ownership.
Final Thoughts
Yes, a house with a mortgage can be placed in a trust , especially a revocable living trust, without triggering immediate repayment. Doing so can simplify estate planning and ensure a smoother transfer of property after your passing.
Always consult with an experienced attorney or estate planner to help navigate the process and protect both your interests and those of your heirs.
Frequently Asked Questions (FAQs)
Q1: Will putting my house in a trust affect my mortgage?
No, placing your home in a revocable trust typically does not affect your mortgage. Under federal law, lenders generally cannot enforce the due-on-sale clause in this situation.
Q2: Can I refinance a house that’s in a trust?
Yes, but the process may be slightly more complicated. You may need to temporarily remove the property from the trust or provide documentation to the lender.
Q3: Do I still pay property taxes and insurance if my house is in a trust?
Yes, you remain responsible for all obligations, including mortgage payments, taxes, insurance, and maintenance, even if the home is in a trust.
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