Posted by pat/WA on 5/17/12 6:04pm
Msg #421167

trusts

Can someone explain to me why it is necessary to quit claim a deed out of a trust, sign documents as an individual and then quit claim it back into the trust.
In addition to this there are between 8 and 12 excise tax statement to be signed

Reply by Calnotary on 5/17/12 6:07pm
Msg #421168

Some banks prefer to lend money to individuals than entities.

Reply by pat/WA on 5/17/12 6:10pm
Msg #421169

sounds like legalized fraud to me

Reply by SheilaSJCA on 5/17/12 6:11pm
Msg #421171

huh? legalized fraud? what don't you understand? n/m

Reply by MW/VA on 5/17/12 7:19pm
Msg #421178

IMO it isn't a good idea to jump to conclusions just because

you don't understand it. It's the lender's call to make, not yours.

Reply by SheilaSJCA on 5/17/12 6:10pm
Msg #421170

Some lenders will not loan money to "trusts" only to individuals. So they want the property title to be to the signers held as individuals. After the loan gets closed, they can put the property back in the trust, with the title held by the trust. Each and every transfer (any kind of deed) warrants its own county form regarding a taxable or nontaxable event.

Reply by kathy/ca on 5/17/12 11:12pm
Msg #421200

Sheila is right, same idea as taking 1 person off the DOT

using a QCD to fund then placing that person back on after funding. It happens all the time for various reasons such as removing the person unable to qualify for the loan!

Reply by John Tennant on 5/17/12 11:12pm
Msg #421201

I have one of those trusts. Sheila has it right. It is very difficult for the lender to hold the trust responsible compared to holding an individual person responsible. Easy to sue a person, difficult to get a judgement in their favor if they are suing a trust.

Even if the property is put back into the trust, the individuals that signed the loan are responsible. We put the property back into the trust because we do not want our heirs to have to file probate. In California probate is costly and a pan.

Reply by Buddy Young on 5/18/12 12:03am
Msg #421203

Re: sheila is correct!!!! n/m

Reply by BobbiCT on 5/18/12 6:54am
Msg #421209

Lazy lenders, loan officers, and closers ...

Hear about this all the time - because sophisticated high-net worth individuals contact their estate planning attorney before transferring title out of the trust (and back again). Doing this can wreck an estate plan and re-start a timeline running; i.e., gifting, Medicaid and estate death tax issues.

The bank I worked for NEVER required its borrowers to do this; of course, our Board of Directors included two intelligent attorneys who understood the legal ramifications of removing properties from Trusts, particularly unnecessary for Revocable Trusts. Also, these loans to individuals secured by real property held by a Trustee were saleable on the secondary market.

Why wouldn't a lender do it: It takes "more brains and time" for the person preparing the loan closing package to create documents with the correst names/titles/trust name on them. The lawyer who prepared the trust or represented the borrower must provide certain certifications to the lender (which requires someone with legal brains at the lender's end to review), which in today's low-cost, instant loan gratification slows down the process and costs the lender "money" in time spent. Lender doesn't expend and extra minute or dime by requiring the borrowers to make it "normal" like all the cookie cutter other loans.

Reply by GWest on 5/18/12 9:14am
Msg #421214

Re: Lazy lenders, loan officers, and closers ...

My biggest complain is a lot of time the borrower is not advised correctly on what is being done.
They are not aware that they have to put the property back into the trust. I have had two properties that have been listed for sale, one just last week, wherein the property was removed from the trust for a refinance, and never put back in. The owner later died. We are now looking at probate which will add about 8 months before we are able to list the property for sale.

Reply by JanetK_CA on 5/19/12 2:24am
Msg #421302

Re: Lazy lenders, loan officers, and closers ...

Thanks for chiming in on this one, BobbiCT. I've often suspected it was pure laziness.
I see a lot of trusts in my area and the combination of circumstances is all over the place. I never thought about those consequences of taking the property out of the trust, but it makes sense. And I HAVE had some borrowers be very incensed about having to take the property out of the trust at the lender's request. I think some of them just don't know how to handle the paperwork if it's left in the trust. (I have another one tomorrow morning where property is staying in the trust.)

What bugs me is that so many title co's - including some of the biggies - refuse to have anything to do with putting the property back into the trust. That's another thing that irritates lots of borrowers. I try to always make sure they know that they'll be responsible for putting it back into the trust when that's the case. Most of the time, they do, but once in a while, they don't have a clue. I will generally refer them back to their estate planning attorney who helped them create the trust.

Reply by LKT/CA on 5/18/12 11:53pm
Msg #421288

BobbiCT stated it best

It isn't necessary to remove property from a trust to refinance. A home can be refinanced and remain in the trust. I've done many that way. All of my real estate classes were taken at the junior college - all taught by brokers and my instructor handled escrow for her own deals. In CA, a broker can do that for their OWN deals only. This was 2.5 years ago that I took the class and she emphatically stated that - these days - it's totally unnecessary to take real property out of a trust and deed it back to the trust.

Reply by Bee_CA on 5/19/12 11:17am
Msg #421317

Re: BobbiCT stated it best

I had a signing for a refi this week. The borrower kept insisting her property was in her trust, but none of the paperwork indicated that. We pulled out ALL of her home documents and found that when she refinanced in 2010, the lender made her take the property out of the trust, and provided no paperwork to go back into the trust....

Good thing nothing happened to her during that time. I also referred her back to the attorney to get the property back into the trust. What a mess!!