Refinancing Property-Living Trust

Refinancing a Property in a Living Trust

Have you ever had to take your home out of your living trust in order to refinance it?

It’s normal and happens all the time.  No need to worry.  But make sure that the property is deeded back into your trust after the close of escrow.

When a bank finances property, it wants to do the financing in your personal name, not in the name of the trust.  The bank worries that a revocable trust (aka living trust) could be, well, revoked.   Without a trust, is there anyone to personally guarantee the loan?  In the case of a living trust, the answer is yes, the settlors.  But most banks still require you to put the property into your name for financing purposes.

Sometimes, the escrow company will prepare a quitclaim deed (back to trust) for you to sign, which will be recorded after financing.  Usually, it won’t.  So you should proactively ask that this happen and follow up to confirm that it was recorded.


It is vital to make sure your property is retitled into trust. Otherwise, you risk the trouble of a court petition or even a formal probate proceeding.   The story below talks about what happens if the property isn’t put back in trust.


What If Settlor Didn’t Put the Property Back in the Trust?

              A client came to me with this problem:  He was the oldest child of decedent Dad.  Several years ago, Son helped Dad download a living trust from an online legal form site.  The trust was signed and notarized.  Then it was filed away.  Several years after Dad’s death, Son brought the trust to me to analyze.

Dad had two properties in Los Angeles.  He didn’t transfer either of them into the trust.  He assumed that his job was finished when he signed the living trust instrument.  He probably thought that that the two properties were “in trust” when he signed.  Dad was mistaken.  Dad had to take the extra step of recording a grant deed, quitclaim deed, or trust deed transferring the property into the living trust.

Since Dad did not do this during his life, we had to go to court to file a pair of Heggstad petitions.  These are petitions that ask the court to order that the property be put in the name of the trust after settlor’s death.  The petitions are brought under California Probate Code section 850.  We were able to successfully petition the court because the trust specifically mentioned the properties by their addresses.   The case would be harder if the trust had not explicitly defined the properties.

During a recent probate symposium, Judge Mitchell Beckloff (Presiding Judge, Los Angeles County Probate Court), provided his view regarding the impact of Kucker v. Kucker, (2011) 92 Cal.App.4th 90, on future Heggstad petitions under Probate Code section 850.  In dicta, Kucker stated that a general assignment that does not specifically identify real property would be ineffective to transfer such real property to the trust. When asked his view regarding petitions to confirm title of real property, Judge Beckloff said there was no reason not to follow Kucker.  Accordingly, confirm that all real property is properly titled in the trust, or at the very least, is adequately identified on trust property schedules.

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