Title removed from living trust
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Title removed from living trust
Dear Phyllis:
After years of reading your real estate questions and answers, I have a doozy! My parents had a living trust established. They have both passed, my father more recently. I just learned that the refinance removed his home from the living trust. I consulted an attorney, and the attorney said we must go through probate. Have you experienced title being removed from a living trust? And do you have any advice? Jeff
Dear Jeff,
This is a very timely question, and I am glad you asked. Unfortunately, this situation occurs more often than people expect, and it can even lead to probate even when someone has created a living trust. Each lender follows its own policy. In some cases, the lender requires borrowers to temporarily remove the property from the living trust to obtain financing. When this happens, the lender or escrow company should ensure that you sign a series of grant deeds (sometimes called quitclaim deeds) to transfer title out of the trust for the loan process. After the loan closes, they should transfer the property back into the trust.
Unfortunately, people sometimes overlook this final step. When no one transfers the property back into the trust after a refinance, the estate can end up in probate. I am a Realtor, not a real estate attorney, so I cannot provide legal advice. You should consult an experienced trust attorney. You can also ask whether a Heggstad Petition applies to your situation. I have seen clients file a Heggstad Petition when a property never returns to the trust, but clear intent exists to transfer it back after refinancing. If the court approves it, the petition can help avoid probate.
Best of luck to you!
Footnote: For those who want to find out if your title is still held in trust, contact your real estate agent (or any real estate agent). If no longer in your trust, you will need to have a deed prepared and recorded. An attorney can do this. However, you might consider going back to the lender or escrow company that assisted you with your refinance.
Seems easy and complicated at the same time. I imagine the same can happen in a reverse mortgage.
Actually, the lender and the escrow company should have warned the borrower.