During the process of estate planning, we address the need for properly handling property transfers via the creation of a trust. Many people think that a trust is something that only people with a lot of money do or that it’s an allowance for your heirs after you die. In fact, anyone who has assets or property, including a house, may set up a trust. For example, if you wish to ensure that a minor child or a loved one with special needs is cared for after you pass, creating a trust to control their assets can help. Or, if you wish to have your property pass to your children, if you’re in a blended family, or want to protect assets from potential lawsuits, creditors, or even taxes, then a trust is beneficial.
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Why Should I Put a House in Trust?
When it comes to real estate, a trust can ensure that a home stays in the family or that a surviving spouse becomes the sole owner of the house, without the need for probate or a re-appraisal. Trusts can also protect the surviving spouse from paying off the entire mortgage when the other spouse passes.
Nearly every mortgage contains a “due-on-sale/due-on-transfer” clause, which allows the lender to demand payment in full on the loan if certain situations occur. A title transfer will be one such circumstance if the title is transferred without advance consent in writing by the lender.
Joint homeowners may be protected under the Garn-St. Germain Depository Institutions Act. It exempts transfers of some types of residential real estate from the due-on-sale clause in mortgages. However, even though the law has been on the books for over 30 years, estate planners and lawyers may still face challenges to the exemption process.
Under this Act, certain real estate property is protected when it’s transferred “into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.”
Using a Trust For Real Property
A trust cannot own, manage, or sell real estate or other property. However, the trustee administering the trust may hold legal title to the property on behalf of the individual or individuals that the trust benefits. This means that the trustee may lease, sell, or otherwise manage the property.
Title companies will ask about the extent of the trustee’s powers over certain types of property. The amount of power that the trustee has is spelled out in the trust document. Sometimes, a Land Trust may be established to protect the owner’s privacy. The trust is listed as the owner on public records and not the actual resident.
Houses in Trust in Texas
The main benefit of putting a house in a trust in Texas is to bypass the probate process. Even if you have a will, all of your assets will go through probate when you die. For married couples, placing a house in trust ensures that the surviving spouse becomes the sole owner when the other spouse dies. It means that the surviving spouse immediately becomes the owner of the house, and this ownership is protected if someone challenges the will or if the estate has creditors. This way, the house won’t be sold to pay off creditors or sold, and the proceeds divided if the will is successfully challenged.
Do You Need Help With Estate Planning?
If you need help with estate planning, or you wish to protect your house from being subject to a “due-on-sale” clause, then a professional estate planner can help. Get in touch with an estate planning expert to discuss your financial situation and unique needs.
