By Edgar Saenz
Does this describe you? You created a living trust. Then you transferred your home into it. Later, you took advantage of low interest rates and refinanced. After the financing, you found out escrow took the property out of trust to record the loan documents. You want to know if there’s a problem.
Don’t worry. It’s not a problem. This is normal. It happens all the time. Just make sure the property is returned to the trust.
Almost all banks require the old in-n-out. As a condition of loan, it requires that title be in the borrower’s personal name. Never mind that a living trust for all intents and purposes is the individual. Banks are creature of habit, and at least in this area, they do things the old-fashioned way. When a bank finances property, it wants to do the financing in your personal name, not in the name of the trust. Perhaps the bank worries that because it is a revocable trust, you could revoke the trust and then there isn’t anyone who has personally guaranteed the loan. This is nonsense, of course. The bank could simply require a personal guarantee from the borrowers. Maybe the bank worries that the trustees could change. So what? The borrowers would still be personally liable.
I said “almost” all banks. Last year, Chase in Los Angeles didn’t require the old-in-n-out. It was fine leaving title in the name of the trustees throughout the refinancing. Sadly, this is the only instance of enlightened financing that I’m aware of.
Hopefully, this isn’t the first time you’ve heard about this. Your attorney should have explained it to you. Or the banker, mortgage broker, or escrow officer should have explained it. Even the notary public could have explained it if one of the hundreds of documents you signed at closing was a quitclaim deed deeding the property back from you to your trust.
Inquire whether escrow prepared the paperwork to deed the property back into your revocable trust, that you signed it and it was recorded. If that didn’t happen, no big deal. Prepare a grant deed or quitclaim deed. Record it. In Los Angeles County, the recording fee is usually under $25. (Don’t forget the Preliminary Change of Ownership Report. It’s required in California every time a deed is recorded. Check the box for a transfer to a revocable trust. This prevents a reassessment. There’s no fee associated with the PCOR.)
It is vital to make sure the property is retitled into your trust. Otherwise, a probate petition might have to be filed to distribute the property to your trust. Worse, a full-blown probate might have to be filed down the road after you pass and the home could get distributed to family members you didn’t intend.
Naturally, my office offers re-transferring services for a reasonable fee.
Thanks for reading!