Title removed from living trust

Title removed from living trust

Ask Phyllis: a blog series of frequently asked real estate questions. Email us here

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 his home was removed from the living trust during a refinance. The attorney I consulted told me we will have to go through probate. Have you experienced title being removed from 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 is more common than one would think. It can lead to probate even when a living trust was previously created.

Each lender has their own policy. To obtain financing, some will require that title be removed from the living trust. When required, the lender or escrow company should make sure that you are signing a series of Grant Deed (transfers of ownership sometimes referred to as Quitclaim Deeds) to transfer title briefly out of your trust to obtain the loan. After closing it should then be transferred back into the trust.

Unfortunately, this final step of transferring title back into the trust, is occasionally overlooked. When title is not deeded back to the trust after a refinance it could result in probate. I am a Realtor and not a real estate attorney. Thus, I can’t advise you on legal matters. You should be dealing with an experienced trust attorney. Ask this attorney if a Heggstad Petition would apply to your circumstance. I have had clients in your situation file a Heggstad Petition when the property was never put back into the trust when there was clear intent that it would be re-transferred once the refinance was completed. If successful, this should 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 who assisted you with your refinance.