As part of your estate plan, we generally include the necessary deed preparation to put your real properties into your trust. Our firm files a quitclaim deed placing legal ownership of any real estate from your name as an individual to you as trustee. In the case of an irrevocable trust, however, there are other considerations. Because an irrevocable trust has someone other than you as trustee, and you are generally not the beneficiary of the trust, placing your home into the trust may seem daunting. Either way, here are some common concerns clients have:
Revocable Trusts
Because of a law called the Garn-St. Germain Depository Institutions Act, the mortgage on your home cannot become due when the home is transferred into your trust. Most mortgages have a “due-on-sales” clause designed to trigger full repayment of the loan if home ownership changes. In the case of retitling a home from an individual to a trust however, there is no third-party, no exchange of money, and no real sale. The Garn-St. Germain Act prevents the mortgage company from claiming the mortgage is due and you can continue to make mortgage payments as normal. However, the act does not eliminate the mortgage, or the responsibility by you to pay it. If the mortgage payments stop, the foreclosure proceedings will begin.
When a home is retitled to a revocable trust however, you must re-apply for your homestead exemption. Most counties in Georgia allow an application to be submitted online. When asked for the ‘owner’ you write out the name of your trust. The other information requested (address, phone number, social security, etc.) are all just your information. Most counties also require your certificate of trust to be submitted with your application.
Additionally, after retitling your home, you should reach out to your homeowner’s insurance and umbrella policy holder and add the trust as the insured. Sometimes your insurance company will let you know this action is not needed, but you should reach out and ask. Depending on your policy, an insurance company could claim that the current owner of the home (the trust) isn’t the insured and therefore isn’t covered and so the damage isn’t covered.
Irrevocable Trusts
For Medicaid Asset Protection planning, putting your home into your trust is vital. Only by retitling the home to the trust can you assure the home is protected and will not be taken by Medicaid at your passing. Our trusts have a clause, however, that state you have the exclusive right to reside in the home until your passing and since you are still the primary beneficiary of the residence portion of the trust, the Trust (therefore you) are still entitled to any homestead exemptions you as an individual are entitled to. Again, you must submit your homestead application and cannot simply continue as you have in previous years.
Unlike deeding a home to a revocable trust, because you are not the Trustee or the beneficiary, a home with a mortgage could trigger the due-on-sales clause. Legally, the retitling does not meet the requirements for exemption under the Garn-St. Germain Act, but from a practical perspective, as long as the mortgage is being paid it is not in the best interest of the mortgage company to trigger the due-on-sales clause. They are better served to assure the continued and guaranteed payment.
Retitling your home into a trust, revocable or irrevocable, is a vital part of an estate plan. Real property is one asset in Georgia that cannot be given a beneficiary designation or avoid probate. Even if every other asset has a named beneficiary, if the deceased owned real property there will likely need to be some sort of probate proceeding to get clear title to the property for new ownership.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney-client relationship between you and Grissom Law, LLC.