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Do I need to specify anything special when refinancing a home in trust?

Do I need to specify anything special when refinancing a home in trust?

Full question:

I live in Ca. My home is split in a revocable trust(mine) and a bypass trust(my deceased wife). I want to refinance the home. Do I need to specify anything special with the mortgage company? Do the mortgage paperwork need to be identified as held in trust or can I have it in my name only?

Category: Trusts
Date: 04/07/2025
State: California

Answer:

The requirements for refinancing your home depend on whether the bypass trust is revocable or irrevocable. If the bypass trust is irrevocable, lenders may face challenges in foreclosing on the property if necessary, as the property is legally owned by the trustee, not you. This can make it similar to an unsecured loan for the lender.

To refinance, you might need to transfer the property out of the trust into your name or the trustee's name, complete the refinancing, and then transfer it back into the trust. It's essential to consult with your lender to understand their specific requirements, as they can vary.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What happens to a revocable trust when one spouse dies in California?

In California, when one spouse dies, a revocable trust typically becomes irrevocable. The surviving spouse may continue to manage the trust assets, but they cannot change the terms set by the deceased spouse. The assets in the trust will generally bypass probate, allowing for a smoother transfer to the beneficiaries as outlined in the trust document.

What happens to a bypass trust when the surviving spouse dies?

When the surviving spouse dies, a bypass trust usually becomes irrevocable and its assets are distributed according to the terms of the trust. The trust's assets may be subject to estate taxes, depending on the value and current tax laws. It's essential for the successor trustee to follow the trust instructions for proper distribution.

Can you refinance a property in a revocable trust?

Yes, you can refinance a property held in a revocable trust. However, the lender may require you to transfer the property out of the trust into your name or the trustee's name to complete the refinancing. After refinancing, you can transfer the property back into the trust. Always check with your lender for specific requirements.