I want to talk to you about putting property into a trust and who owns the property in a trust. Living revocable trusts everybody I think should actually probably have one if you’ve got property.
However, they fail in most families because the lawyer doesn’t teach them how to fund the trust. The trust has to own stuff the stocks, the bonds, the bank accounts, the brokerage accounts, the real property.
How do you get the real property into the trust?
Well you’re gonna have to deed it that’s the only way that you transfer a property real property is through a deed. So we’re gonna make out a deed from you I assume it’s in your name now. If it’s in your LLC or something you’re not gonna put it into the trust just the stuff that’s in your name.
So you’re gonna make out a deed going from you as the grantor to the trust and the trust is then going to be the owner. A couple of three or four things we’ve got to talk about.
What kind of a deed do you use?
You can use a quitclaim deed in this situation. If you’re moving property to an LLC from you to an LLC or something. Then you should be using a warranty deed. Because you want the warranties that are associated with a prior deed and the property to go along with the transfer.
In this case though basically all we’re doing is we’re taking the piece of property from one of your pockets and putting it into the other pocket you technically still own it. Well, technically you don’t own it legally you don’t, the trust does but for all practical reasons, you own it.
The courts say you still own it the IRS says you still own it everybody says you still own it kind of. So a quitclaim deed moving it from one of your pockets to the other pocket will work. The warranties are still with you because we didn’t change you.
So most attorneys use a quitclaim deed when they transfer property from you to the living revocable trust. By the way, a quitclaim deed means you quit claiming any interest that you have in the property and you give that interest whatever it is to the person that the deed goes to the grantee.
So we’re going to use a quitclaim deed probably. It goes from you to the trust. On the trust, you have to have three parts to the name of the trust and you have to have the name of the trust and that could be your name the John Doe Living Revocable Trust.
Which would be abbreviated John Doe Trust but in this case use the whole name the John Doe Living Revocable Trust Under Agreement or Dated such-and-such a date and then the name of the trustee John Doe, Trustee. So you’re gonna be the guy who gives it up and you’re gonna be the guy who takes it as the trustee.
Technically the title is held in the name of the trustee and I get one or two cases a year where the attorney or the title company or whoever forgot the date on the trustor they forgot that trustee’s name.
So you’ve got to have all three of those elements name, date, trustee and you’ve got to have the property description and you’ve got to have your name as the Grantor. Your name has to be exact on that quick claim deed exactly the way it is on the deed as it is now as you own it now.
If it’s John L. Doe then it needs to be “John L. Doe” on the quitclaim deed. if it’s John Doe on the original deed and you put John L. Doe that ain’t going to work, that isn’t exactly the same. The names have got to be the same.
The property description’s got to be the same in the name of the trust once you’ve got those you’re pretty much just in a standard deed situation with a quitclaim deed.
Now is there a tax consequence?
The answer is no. However, some states have passed laws for example California has Proposition 13. That said we can’t increase the property taxes on your property until it changes hands then we get to increase the property taxes.
They did this back in the 70s or whenever because the property values were going up so fast in California and they were increasing the property tax every year and the people were going “I can’t do this” so they said okay time out we will only change the property tax when you transfer the property. Well, this is a transfer of property.
Okay, Prop 13 says well it’s from you to you the law says it’s from you to you so in California, for example, you simply have to tell the state file a paper with them that says we’ve just transferred it from me to living revocable trust and then they won’t increase the property tax.
If you’re in Florida or Texas you’ve got to worry about the homestead you should have a paragraph in your trust that talks about the homesteads and you may have to go down and file a paper with the state saying now, time out this is still my personal residence I get to homestead it even though it’s in the name of the living revocable trust.
Call up your County Recorder your parish recorder if you’re in Texas and they should be able to tell you what the scoop is on that. So those are things you have to worry about.
You shouldn’t have to worry about your insurance. It’ll still be in your name that’s fine it’s you it’s not like you transferred it to an LLC or something where they get to change the name of the game.
You may want to have the insurance company recognize that it’s in a trust. But that’s usually not necessary, you shouldn’t have to have an increase in the property taxes. In fact, the law says they can’t increase the property tax on me now you may have to notice them as you do in California and I think California is the only one you have to do that with I’m not sure.
So what else do you need to do in order to transfer real property into your living revocable trust?
That’s about it it’s not hard I would record the deed. If the deed ever gets lost then the recording of the deed works. I don’t even need the deed once it’s recorded.
So record the deed that’s probably a good idea so you don’t worry about losing the deed you could keep the deed and not record it and then the family could record it after but you might as well record it, then we know it’s there and everything’s cool.
You put it in your file cabinet or wherever to put it in your safe-deposit box I don’t care what you do with your deed wherever your deeds are normally kept keep this deed with those deeds.
You should be able to transfer your piece of property with really out not much problem as long as it’s from you to the living revocable trust use a quitclaim deed.
Make sure the name of the trust is there make sure your name is there exactly as it was before if it’s you and your wife, husband you got to have the–everybody’s gotta sign and of course the deed has it’s seven or eight elements that you have to follow but we’re not going into that right now.
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