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One of the most common questions we hear when discussing estate planning with homeowners is: “Can I still put my house in a trust if I have a mortgage?” The short answer is yes—you can and often should—but let’s break down what that really means and why it matters.

Trusts and Mortgaged Property in California

In California, it’s entirely legal and quite common to transfer a home with a mortgage into a revocable living trust. The purpose of doing so is usually to avoid probate, to provide a clear plan for what happens to your home after your passing, to avoid unnecessary taxation on your loved ones, and to help your loved ones manage your affairs more smoothly if something happens to you.

Here’s the good news: your mortgage lender cannot call the loan due (i.e., demand full repayment) just because you move the home into your revocable trust. This protection is granted under the federal Garn-St. Germain Act, which allows homeowners to transfer their primary residence into a revocable trust without triggering what’s called a “due-on-sale” clause.

So, if you’re worried that transferring your home into a trust will somehow violate your loan agreement or create new problems, you can rest easy. In most cases, the process is straightforward and in your best interest.

Why You Should Consider Putting Your Home in a Trust

If your home is not in a trust at the time of your death, your loved ones will likely need to go through probate to transfer title, even if there’s a mortgage. Probate in California can be slow, costly, and public, which is why so many families choose to avoid it by creating a living trust.

By placing your home in a trust now:

• You maintain full control over it during your lifetime.
• You ensure a smoother transfer to your beneficiaries.
• You save your family from unnecessary legal hassles down the road.

 

How the Process Works

To transfer your mortgaged home into a trust, you’ll typically need to:

1. Sign a new grant deed that transfers ownership from you (as an individual or couple) to you as trustee(s) of your trust.
2. Record that deed with the county recorder’s office where the property is located.
3. Update your homeowner’s insurance policy to reflect the trust as an additional insured.
4. Notify your mortgage lender, if required by your loan agreement or title insurer.

This process is a routine part of estate planning in our office, and we guide our clients through every step, including preparing and recording the deed for you.

 

A Note for California Homeowners

California has some unique considerations when it comes to property taxes, thanks to Propositions 13 and 19. When transferring your house to a trust, you typically don’t trigger a reassessment, but things can get complicated if you’re planning to transfer your house to a non-spouse, such as children or other family members, upon your passing. This is one reason it’s important to work with an estate planning attorney familiar with California law.

Bottom Line

Yes, you can place your mortgaged home into your living trust—and it’s one of the smartest moves you can make to protect your family’s future. At Herbert Law Office, we help homeowners throughout California create customized estate plans that reflect their goals, minimize legal red tape, and protect their legacy.

Have Questions About Putting Your Home in a Trust?

We’re here to help. Contact Herbert Law Office today at (661) 273-9007 to schedule a FREE consultation and find out if a living trust is right for you, even if your home still has a mortgage.