How Do You Transfer Ownership of Real Estate Held in a Trust?
Some people choose to hold real estate in a trust instead of keeping it as a personal asset. In fact, there are many good reasons to make this decision. When you purchase (or subsequently transfer) real estate using a trust, you can maintain anonymity and avoid death taxes as well as probate. Property might also be held in a trust if there is more than one owner. Whatever the reason, it is important to know how to transfer such property when the settlor passes away. Learn how to comply with the requirements of estate law to get the property into the beneficiary's name.
As a trustee, your first step should be to prepare a deed. It may come as a surprise to find out that there are a wide variety of deed types. Thus, it helps to know that you should be focusing on drafting a grant or quitclaim deed. Of course, the exact deed type may vary from jurisdiction to jurisdiction. You can always consult a real estate attorney to ensure that you are using the right type of deed for a trust transfer.
A real estate attorney can also assist with including the right type of language in the deed. You'll need to make sure that the wording indicates that the transfer is not the result of a sale. If you fail to do this, the property could be subject to a transfer tax. You'll also need to determine how the beneficiary is planning on taking title to the property. Again, this will largely depend on the available options in your jurisdiction.
Dealing With Mortgages
There is a chance that the property in question still has an active mortgage. This begs the question of what happens to the mortgage upon transfer. In general, the mortgage will remain attached to the property. This means that the beneficiary (or new owner) will have to continue paying the debt. The bank may require the beneficiary to assume the current mortgage or to seek out a refinance.
In respect to mortgages, there is a second scenario that may apply. Some settlors create the trust with an indication that the mortgage will be satisfied by trust assets. If this is the case, it may be possible for the beneficiary to take the property free of any mortgage. However, it will depend on how the trust was set up from the beginning.
The Final Step
Once the steps above have been completed, you will have to formally file the deed. This will affect a legal transfer. To do this, you will need to submit the signed, notarized deed to the county recorder. Once this is done, the beneficiary will be recognized as the new, legal owner of the property.
Reach out to our team at TR Spencer Law Office to get assistance with estate or real estate law issues in the state of Utah.