When many people do their estate planning, they choose to place their assets in a trust. Often, people create revocable living trusts that allow them to retain control over these assets while they're alive, but make things easier for their heirs after they are gone.
A revocable trust, as opposed to an irrevocable one, lets people make changes to it during their lives. This includes changes to beneficiaries and terms.
One of the most valuable assets that most people have and want to place in their trust is their home. However, what if, like most people, you still have a mortgage on that home? Can it still be placed in the trust? It can, but there are considerations you need to be aware of.
First, the mortgage is still the responsibility of the person(s) listed on the loan. Therefore, if two spouses are listed on the mortgage, but they put the home in a family trust that includes their children, who will eventually get the home, that doesn't make the children responsible for the mortgage payments.
Further, you need to have the lender's permission to transfer the home to your trust. Most will grant that permission. However, it's essential to make them aware of the transfer. If you don't, the lender could consider it defaulting on the mortgage.
Many mortgage have a "due on sale" clause that requires the mortgage to be paid off when the title is changed (which it is when placed in a trust). Lenders will usually waive that requirement if the house is the borrowers' primary residence. However, it's important to get that in writing.
It's essential if you plan to transfer your home to your living trust that you be aware of your obligations to your mortgage lender. Your Florida estate planning attorney can help ensure that you follow the proper procedures to avoid financial and legal consequences.
Source: SFGate.com, "Can You Put a Home that Has a Mortgage in a Family Trust?," Christie Thompson, accessed Sep. 28, 2017