Funding and Vesting Into a Trust

Funding and Vesting Into a Trust

If you want to fund your mortgage directly into a trust or hold the title in a revocable trust, this can help explain the process.  First, getting approved for financing and deciding who legally owns the property (holds the title) are two separate distinctions. When applying for a mortgage loan, whoever is listed on the loan application will be the ones whose income, credit and assets will be evaluated when the mortgage is processed and approved. However, that doesn’t also mean those who are on the mortgage application can be the only ones who can be on title. Being on title means an entity has a legal claim to the property and the property cannot change hands without those on title being released from ownership. Typically this means the home is sold and those appearing on title have received their share of the proceeds.

Property Title Overview

There are different ways to hold title, some a bit more complicated than others perhaps but there are reasons individuals take title in different ways. For example, when an individual buys a property, title is held as a “sole owner.” When two or more individuals take title together, they can own as “tenants in common.” This status means each individual owner can own a certain percentage of the property and this tenancy allows the individual owners to sell their share at any time should they so choose. Joint Tenancy is probably the most common way title is held. All owners take ownership at the same time and all own the property equally. When one of the owners passes away, the surviving tenant receives the deceased’s ownership.

Finally, another way to take title and one that is becoming more popular over the years is funding the mortgage directly into a trust and holding title in a trust, more specifically into a revocable trust. This keeps the ownership of real property, including real estate, hidden from third parties and there are several advantages holding title in this manner.

Vesting into a Trust: Process and Benefits

A trustee is assigned to manage the trust and is typically the owner of the property. A revocable trust is one that can be changed by the assigned trustee. For example, a trust lists that upon the death of the trustor four heirs each receive an equal share of the property. Later, one of the heirs falls out of favor with the trustor and the trust is changed, eliminating the offending heir.

Property vested into a trust is shielded from lawsuits and claims from the owner of the home because the location and ownership of the real property is protected from third parties. Challenges in court against a trust are nearly impossible to succeed compared to relatives that challenge the distribution of an individual’s assets upon death. When a trust is involved, the distribution terms are spelled out in the legal documentation and cannot be challenged in court. There will be a fee to set up a trust but the charges are minimal and there is very little legal work involved.

What’s Next

If you’re thinking about buying real estate or you currently own a home and want to place your home into a trust, consult a local attorney who can help. Finally, let me know in advance how you’re going to take title before you get too far in the process. There is a bit of paperwork involved including title work but it’s really a simple process.