Putting your home, second home or investment property in a living trust lets it pass to your heir immediately, without going through probate. After you create the trust, you sign a deed transferring title from yourself as the owner to the trustee, who's usually you, too. As the trust is revocable, you can take the title back if necessary.
If you decide to refinance your property, you’ll probably need to take back title. Mortgage lenders prefer dealing with people to dealing with trusts. To land the refi, you have to take title back, then sign the mortgage paperwork. After that, you can put the house back in the trust. Of course, you can take the real estate back simply because you’ve decided a revocable trust isn’t the right estate planning tool for you.
The method for taking property out is the same as putting property in. As trustee you make out a new deed giving title back to yourself as owner. If you want to put the house back in the trust later, you then transfer title back to yourself as trustee. Each time, you file the new paperwork with the registry of deeds in whatever county you’re located. This normally comes with a fee, but the county may make an exception for trusts.
Some property owners use a quit claim deed for trust-related title transfers. Quit claim deeds give title without any guarantees the title is valid, which is not a problem when you’re transferring title to yourself. When it comes time to sell the property, though, buyers and their title company may see a quit claim deed as a loose link in the ownership chain because it lacks those guarantees. Using a warranty or guarantee deed instead will give future buyers more confidence.
Even though you’re not really deeding the house to anyone else, you can run into problems if you’re not careful. If your mortgage has a due-on-sale clause, the bank might be able to demand full payment of the loan when you file a new deed. Your title insurer may want you or the trust to take out a new title policy, or insist on a look at the trust documents. Know the consequences before you make any title transfers.
- Nolo: How Living Trusts Avoid Probate
- MItchell Ostwald: Revocable Living Trusts
- Allegheny County, Pa.: Frequently Asked Questions (FAQs) about Deeds & Mortgages
- Living Trust Network: Transferring Real Property to a Living Trust
- Consumer Financial Protection Bureau. "What is owner's title insurance?" Accessed August 1, 2020.
- Old Republic Title. “What Is Title Insurance and How Does It Work?” Accessed May 22, 2020.
- Zillow. "What Is Title Insurance and Do I Need It?" Accessed August 1, 2020.
- GovInfo. "Public Law 93-533-Dec. 22, 1974," Page 1728. Accessed August 1, 2020.
A Durham, NC resident, Fraser has written about law, starting a business, balancing your budget and fighting evictions, among other legal and financial topics.