Legal Blog

The Weekly Scenario: Placing Your House in a Living Trust

Question: If I wish to place my house into my Living Trust, will having a mortgage on the property effect my decision to do so?

Answer: You can retitle your house to your Living Trust even with a mortgage on the property. The transfer of real property to the trust doesn’t change your obligation to continue to pay the mortgage as the lender still has the real estate as security for the loan. Sometimes during a refinance, the lender would require that the house be taken out of the trust to get a new loan, only to then put the house back in.

Comment: There is federal legislation which says that the transfer of real property into a Living Trust will not cause a ‘due on sale’ clause in the mortgage to be triggered. If the due on sale clause was triggered, then the lender could demand that you repay the loan in full, as if you sold the property to a new owner.

As always, if you have any questions or would like to learn more, please let me know.


Steven E. Shane

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

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