Creating a comprehensive estate plan is an important first step in protecting your assets and providing for your loved ones. However, many people don’t realize that signing estate planning documents is only part of the process. If your plan includes a revocable living trust, you’ll need to transfer ownership of your real estate by updating your property deeds. This process is called “funding your trust,” and it is essential for your estate plan to work as intended.
As a Southern California estate planning attorney, we help clients understand why deed transfers matter and guide them through the process of properly funding their trusts.
Why Do You Need to Update Your Property Deed?
When you create a revocable living trust, the trust itself becomes a special type of hybrid legal entity that can hold assets. However, your property doesn’t automatically transfer into the trust just because the trust document exists. You must formally change the ownership by recording a new deed that transfers the property from your individual name into the name of your trust.
If you don’t update your property deed, your home and other real estate will not be protected by the trust. This means those assets may still have to go through the probate court after you pass away, defeating one of the primary purposes of creating the trust in the first place.
What Type of Deed Do You Need?
The type of deed used to transfer property into a trust varies, but most people use either a quitclaim deed or a grant deed. As the simplest option a quitclaim deed is usually used for transferring property into a trust, a quitclaim is used because you’re essentially transferring ownership from yourself as an individual to yourself as trustee of your trust. Some family circumstances make a grant deed a better choice.
Your Southern California estate planning attorney can help you determine which type of deed is appropriate for your situation and ensure it ‘s properly prepared and recorded.
How Does the Transfer Process Work?
Transferring real estate into a trust involves several steps. First, a new deed must be prepared that names your trust as the new owner. The deed will typically show the transfer as being from you individually to you as trustee of your revocable living trust.
Next, the deed must be signed, notarized, and recorded with the county recorder’s office where the property is located. Recording the deed creates a public record of the ownership change and ensures the transfer is legally effective.
Some homeowners worry that transferring their home into a trust will trigger property tax reassessment or affect their mortgage. In California transferring property into your own revocable living trust, should not cause property tax increases. The Federal Garn-St. Germain Act prevent transfers to revocable living trusts from triggering mortgage due-on-sale clauses. If your mortgage loan was issued by a small lender, sending a letter letting them know that you have transferred your property to your revocable trust can be a courtesy that saves you from responding to questions from your lender when they become aware of the transfer. Your estate planning attorney can advise you whether this extra step makes sense in your situation.
What About Homeowners Insurance and Property Tax Exemptions?
Although California law makes this optional, after you transfer your property deed into your trust, it is best if four you to notify your homeowners insurance company of the ownership change. Most insurance companies can easily update the policy to reflect that the property is now owned by your trust. Updating the policy to reflect that the property is owned through your trust will make it easier for your successor Trustee to deal with your insurance company is a claim must be made or pursued while if you are incapacitated or have passed away. Depending upon your contract, this may also be needed if you are making payments to providing power under a solar power install financing arrangement.
Don’t Forget About Other Real Estate
Many people remember to transfer their primary residence into their trust but forget about other real property they own. Vacation homes, rental properties, vacant land, and investment real estate should all be transferred into your trust if you want them to avoid probate.
The Importance of Proper Trust Funding
Creating an estate plan without properly funding your trust is like buying a parachute on the way to a plane but then leaving it behind. The parachute exists, but they can’t protect your assets if ownership hasn’t been transferred correctly.
Working with an experienced Southern California estate planning attorney ensures that your property deeds are properly updated and your trust is fully funded. We can help you identify all assets that need to be transferred, prepare the necessary deeds, and guide you through the recording process.
If you’ve recently created a revocable living trust or need help ensuring your existing trust is properly funded, please contact us at 619-281-1888 to schedule a consultation with a Southern California estate planning attorney. We’ll make sure your estate plan works exactly as you intended.