Refinancing when your Home is Titled to your Revocable Trust
With interest rates dropping to a historical low during the pandemic, lots of people took the opportunity to refinance their mortgages. If you refinanced your mortgage in the past year and you also have a revocable living trust as part of your overall estate plan, you need to check the titling of your property to make sure your property is still titled to your revocable living trust.
Most people who set up a revocable living trust understand that retitling their assets to be owned by the trust is a critical part of the process to ensure the trust will work as intended upon their incapacity or death. Your primary residence is one of the key assets that is almost always retitled to be owned by your revocable living trust. The deed to retitle your primary residence to your trust is often signed the same day you sign your trust. The largest benefit of owning your primary residence in your revocable living trust is that it avoids the need for probate court upon your death in order for your intended beneficiaries to inherit or sell your primary residence.
Unfortunately, while your revocable living trust most likely includes the necessary powers to allow you, as the trustee, to obtain a mortgage against any real property owned by the trust, most lenders do not like to deal with the extra steps (aka paperwork and review time) that would be required in order to set up the mortgage through the name of the trust. Instead, most lenders will prepare a deed to take your property out of your revocable living trust as part of the refinance process. This is not a huge problem if you, as the consumer, are notified that this happened so you can take the steps necessary to fix the titling post-refinance. Unfortunately, that is not typically what happens. With all the paperwork involved in a refinance, the deed to transfer your property out of your revocable living trust is often just thrown in as one more piece of paperwork that needs to be signed as a part of the refinance process.
If you are made aware that your property was deeded out of your revocable living trust, after the refinance is completed, it is easy enough for you to contact your estate planning attorney to have a deed prepared to retitle your property back to the trust for a nominal fee. However, if you are not notified that this happened, years could go by and your intended beneficiaries could be the ones who eventually discover what happened upon your death as they are all of a sudden faced with the need to go through probate court in order to transfer and/or sell your property.
If you refinanced your primary residence or any other property in the past year and you have a revocable living trust, take the time now to check the titling and ensure the property was retitled back in the name of the trust after the refinance was completed. If not, contact us today and we will be happy to work with you to fix the titling to ensure your revocable living trust works as intended.