The language that is included within the mortgage document is critical in evaluating what steps should be taken when transferring to a Living Trust any real estate that is still tied to a loan.
Typically, a transfer of real estate into a Living Trust is handled via a Quitclaim Deed, so that the Trust can be “funded” with the property.
Most real estate mortgages state that any transfer of a property makes the loan note on that property due and payable EXCEPT FOR transfers to a Trust where the Grantor reserves the right to revoke the trust (i.e. a Revocable Trust).
So in most cases, funding a Revocable Living Trust with real estate property financed by a loan will not result in the execution of a “Due on Transfer” clause of the note and mortgage on that property.
But before you execute any transfer by Quitclaim, read your specific mortgage documents carefully for the details of your loan!
Additionally, if private mortgage insurance (PMI) covers the property because the owner’s equity is of a low amount, you should also examine those documents carefully to note if any stated restrictions or limitations exist.
For a Living Trust legal forms software package that includes all of the document required to set up and fund a Trust, see here.