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:
- State: California
Answer:
The answer will depend in part on whether the bypass trust is a revocable trust, or an irrevocable trust fund. In order for the mortgagee (bank) to perfect their lien, the trust would have to be a revocable trust. There are issues within the verbage of irrevocable trusts that make it difficult, if not impossible, to foreclose on the property if it goes into default. For a lender, taking a mortgage on a property titled in an irrevocable trust is like not having a mortgage at all (or offering an unsecured note).
The property in an irrevocable trust is protected from creditors because the creator of the trust is no longer the legal owner, instead the trustee is. However, the irrevocable trust is only "creditor-proof" provided that bankruptcy does not occur within five years of the date of the creation of the trust the settlor does not retain any interest in the property and the trust was not be created with the intention of defrauding creditors.
The property may need to be deeded out of the trust by the trustees and into the name of someone, be it the trustee or another as the responsible and qualifying party, then refinanced and deeded back into the trust. We suggest asking the lender what their requirements are, as they vary by lender and the documents involved.
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.
