In this article, we explain the process for securely transferring real estate into a trust. There are 4 east steps that you need to follow to ensure that your real estate is protected: getting the deed ready for transfer, making a record of the deed before transferring, paying taxes on the real estate transfer, and reporting changes to real estate for insurance coverage.
1. Getting the Deed Ready for Transfer
To begin, your attorney will obtain a deed form. that is tailored to your state. A "quitclaim" or "grant" deed may be used.
While deed types differ slightly, they all require the same basic details. Your attorney will need to know the following:
- The names of the existing owners. Only your name appears here if you are the sole owner or if you and another co-owner are transferring only your share of the property. Type both of your names will be necessary if you and your partner own the property together and are moving it to a joint trust. Use the exact same spelling of your name as on the deed that transferred the property to you and on the living trust paper.
- The name of the new owner. Fill in your name(s), as trustee(s), and the date you signed the trust document in front of a notary public exactly as it appears in the first paragraph of your trust document.
- The property's “legal description.” Copy the description from the previous deed word for word. If you co-own the property with others and are just transferring your share, you must also indicate that you are transferring only that share (a one-half interest, for example) or “all your interest” in the property in the legal description.
Sign and date the deed in front of a notary public in the state where the property is located until it is filled in. The deed must be signed by someone you identified as a current owner who is transferring his or her interest in the property to the trustee.
2. Making a Record of the Deed Before Transferring
Once you've signed the deed, your attorney will need to "record" it, which means he or she will need to file a copy of the notarized deed with the county office that holds local property records. The land records office is also known as the county recorder's office, land registry office, or county clerk's office in most countries.
Your attorney will submit to the records office the original, signed deed. A clerk can make a copy and file it in the public records for a small fee. Your original will be returned to you, along with a reference number indicating where the copy can be found in the public records.
3. Paying Taxes on Deed Transfers
When you sell real estate to yourself as trustee, you won't have to pay a state or local transfer tax in most cases. The majority of real estate transfer taxes are dependent on the property's selling price and do not apply when no money is exchanged. Some jurisdictions exclude transactions in which the actual owners remain the same, such as when you transfer land to yourself as trustee of a revocable living trust.
The county tax assessor, county clerk, or state tax officials will provide you with details on any transfer taxes before you record your deed.
4. Reporting Changes to Real Estate for Insurance Coverage
Contact your insurance company to report the shift after you've transferred ownership of real estate. The organization will update the policy's records, but the move should have no impact on your coverage or the cost of the policy.
Mortgages with Due-on-Sale Clauses
Many mortgages have a provision that allows the bank to call (or "accelerate") the loan, requiring you to pay it off in full right away if you transfer the mortgaged house. Fortunately, when property is converted into a living trust, lenders are generally prohibited by federal law from enforcing a due-on-sale provision. If the creditor is a trust beneficiary and the move is "unrelated to occupancy" of the property, the lender cannot call the loan.
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