To transfer real estate (also called real property) into your living trust, you must prepare and sign a new deed, transferring ownership. You can usually fill out a new deed yourself.
Preparing the Deed
First, get a deed form. Try to find one that is specific to your state. You should be able to find one online. Or you may be able to get one at a local law library; look for books on "real property" that have deed forms you can photocopy. You can use a "quitclaim" or "grant" deed form. Nolo sells quitclaim deeds for a handful of states.
Deed forms vary somewhat, but they all require the same basic information. Type in:
- The current owners' names. If you are the sole owner, or if you and someone else co-own the property and you are transferring just your share, only your name goes here. If you and your spouse own the property together and are transferring it to a shared trust, type in both of your names. Use exactly the same form of your name as is used on the deed that transferred the property to you and you used in your living trust document.
- The new owner's name. Fill in your name(s), as trustee(s) exactly as it appears in the first paragraph of your trust document, and the date you signed the trust document in front of a notary public.
Special instructions for Colorado: Colorado law makes it advantageous to hold real estate under the name of the trust itself, not the trustee. (Colo. Rev. Stat. § 38-30-108.5.) So if you hold Colorado real estate in trust, the new owner's name should be, for example, "The Jonathan L. Geery Living Trust, dated November 15, 20xx."
- The "legal description" of the property. Copy the description exactly as it appears on the previous deed.
If you co-own the property with someone and are transferring only your share, you must also state, with the legal description, that you are transferring only that share (a one-half interest, for example) or that you are transferring "all your interest" in the property.
EXAMPLE: Amanda, who owns a house with her sister, wants to transfer her half of the property to her living trust. When she fills out a new deed, she can insert either "a one-half interest in" or "all my interest in" before the legal description of the real estate.
After everything is filled in, sign and date the deed in front of a notary public for the state in which the property is located. Everyone you listed as a current owner, who is transferring his or her interest in the property to the trustee, must sign the deed.
Recording the Deed
After the deed is signed, you need to "record" it -- that is, put a copy of the notarized deed on file in the county office that keeps local property records. In most places, the land records office is called the county recorder's office, land registry office or county clerk's office.
Just take the original, signed deed to the land records office. For a small fee, a clerk will make a copy and put it in the public records. You'll get your original back, stamped with a reference number to show where the copy can be found in the public records.
Transfer Taxes
In most places, you will not have to pay a state or local transfer tax when you transfer real estate to yourself as trustee. Most real estate transfer taxes are based on the sale price of the property and do not apply when no money changes hands. Other places specifically exempt transfers where the real owners don't change -- as is the case when you transfer property to yourself as trustee of a revocable living trust.
Before you record your deed, you can get information on any transfer tax from the county tax assessor, county recorder or state tax officials. Many counties now make this information available online; check your county's website.
Insurance
After you have transferred ownership of real estate, call your insurance agent to report the change. The company will change its records on the policy, but the change shouldn't affect your coverage or the cost of the policy.
Due-on-Sale Mortgage Clauses
Many mortgages contain a clause that allows the bank to call ("accelerate") the loan -- that is, demand that you pay the whole thing off immediately -- if you transfer the mortgaged property. Fortunately, in most instances, lenders are forbidden by federal law to invoke a due-on-sale clause when property is transferred into a living trust. The lender can't call the loan if the borrower is a trust beneficiary and the transfer is "unrelated to occupancy" of the premises. (Garn-St. Germain Depository Institutions Act of 1982 (96 Stat. 1505).)
California Property Taxes
In California, increases in real estate taxes are limited by constitutional amendment (Proposition 13). The assessed value of the property can't go up more than 2% annually until a piece of property is sold. When the property is sold, however, the house is taxed on its market value. Transferring real property to yourself as trustee of your own revocable living trust -- or back to yourself -- does not trigger a reassessment for property tax purposes. (Cal. Rev. & Tax Code § 62(d).)
You may, however, have to file a form called a Preliminary Change of Title Report with the county tax assessor. Call the assessor to find out.
