Can I Refinance A House Held In My Trust?
Hi. This is Marc Herbert from Herbert Law Office with the Question of the week, which is, can I refinance a house held in my trust? The answer is yes, but you have to be careful. I actually got this question last week during Thanksgiving, a family member had just refinanced their house. They have a trust and they wanted to make sure that everything was covered.
So usually it’s fine to do that, but you got to be careful. There are a couple pitfalls when you do that. So generally speaking, as a trustee, you have a lot of discretion on what you can do with the trust assets, including land in California. You can usually sell that land or you can add land in by buying new land or inheriting new land.
You can rent the property out, you can mortgage the property out, and you can also refinance the property. But you got to be careful because in California, title controls everything. So what a lot of refinancing companies do is they’ll take the house out of the trust for purposes of doing the transaction. Most companies want to deal with an individual, their individual credit scores, payment histories, things like that.
Since the trust doesn’t have a credit score or a payment history, they’ll pull title out of the trust and just put it in the names of the trustees, which is fine, except when the transaction is completed. Many times the companies won’t take the final step, which is of course, to put title back into the name of the trust.
That creates a huge problem for us as landowners here, because the land is now subject to probate court, even though it was initially titled in the Trust. It’s the current title that controls the process. So I guess the good news is if you’re in that situation and somebody passes away, there is a shortened probate process to clean up the mess that the refinance company made.
The bad news is it’s it’s probate. So a shortened probate process is usually only six months and it’s usually only 3000 to $5000 wasted. So a much better result is obviously to avoid probate court. And the best way to do that is to check your current title after a refinancing. And it’s very easy to do that. All you should do is look at your property tax statement for this year and then look for certain clues on the statement.
For example, if you see the letters R, that means the title is held in a trust. Or if you see the letters T that names the trustee who’s in charge of that trust. So when you look at your property tax statement, if you see those letters, you should be fine. Those are both very strong indicators that your current deed is back in the name of the trust.
Now, if you can’t find your property tax statement or you just want peace of mind to double check that everything’s still protected, I’m happy to sit down with you and review the current deeds, review the property tax statements. Take a look at your current estate plan to make sure that everything is perfect. If there’s nothing to fix, then you’re all set.
If there’s something little to fix, we can help with that. And then again, if there’s major changes that have happened, especially if your trust is 3 to 5 years old, we can talk about your options when we get to that. Here at Herbert Law office, we offer free consultations. I’m happy to sit down with you, go through all your paperwork, answer all your questions.
So if that would be helpful for you, feel free to give us a call at 6612739007. Talk to you soon. Have a great day.