If you plan to refinance the mortgage on your house and already have an estate plan, you may need to make some changes. First, figure out who holds the title to your home. Then, determine if you want to transfer title to a trust or if you want to leave the home to particular heirs or beneficiaries.
Who Actually Owns Your Home?
When was the last time you looked at your house’s title? For most homeowners, the answer is right after they bought the house. If you do not think that you own the home outright, now is the time to check the title. You can talk to your estate planning lawyer about how to do this, or check it yourself at the county recorder’s office. When you check the title, you may recall transferring the house into the name of a trust, or including both you and a relative on the mortgage paperwork. You also may find that there are liens against the property that you have to pay off. These are all important considerations when refinancing.
If you are looking into refinancing, then you have an outstanding mortgage on your home. This means that you do not own the home outright – the mortgage lender has an interest in anything you do with the house. You will see a record of the mortgage when you check the title.
Why Does Ownership Matter for Refinancing and Estate Planning?
Often, the way you own the house affects both how you can refinance and how you can include the house in your estate plan. For example, if the house is owned by the trustee of an irrevocable trust, many lenders may not agree to refinance the mortgage. If the house is owned by a revocable trust, refinancing will be easier. However, the lender may require that you remove the house from the trust while you get the new loan. A revocable trust means that you can make changes to the property in it when you wish. An irrevocable trust’s property cannot be changed after you put it in trust.
In addition, you usually cannot leave a home to your heirs if both you and someone else own it. If you and your spouse own the house, then your interest in the house will most likely go to your spouse as part of your estate. If you and a relative own the house, you may be able to include only your share of the house in your estate plan.
When deciding whether to refinance, consider your plans for leaving the house to heirs or beneficiaries. If they have to take over the mortgage, will they be able to make payments? Consider setting aside money in trust or from life insurance for your heirs to be used towards the mortgage. Finally, talk to your estate planning lawyer about more changes you will need to make to your estate plan when you refinance.
Planning your estate and want to refinance your home? Angela Klenk, Esq. and the team at Beach Cities Estate Law couple personalized attention to your estate plan with big law firm experience for a winning combination to give you peace of mind. To schedule a case evaluation, visit Beach Cities Estate Law online or call Angela’s office at (424) 400-2125.