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Can I put my house in a trust while I still have a mortgage?

Updated: Mar 23

Clients often ask us whether they can transfer their home into a revocable living trust while they are still paying off their mortgage. We delight in being able to tell them YES, YOU CAN! Below, we will delve into the details and history of this process, to help you gain a comprehensive understanding of how this convenient approach to estate planning can be beneficial for both real estate management and long-term financial stability.

The Garn St Germain Act of 1982

In 1982, the United States Congress passed the Garn-St Germain Act, a pivotal legislation that holds immense relevance in the realm of estate planning and provides many advantages for homeowners. While the name of the act itself is not important, understanding its impact is crucial for homeowners seeking to navigate the details of estate planning and maximize the benefits afforded by this legislation. By exploring the key provisions and benefits of the Garn St Germain Act, homeowners can gain valuable insights into how this legislation can positively influence their estate planning strategies and ensure long-term financial security.

Garn St Germain and Estate Planning

For estate planning purposes, the Garn-St Germain Act made it possible for homeowners to transfer their property into a living trust. A living trust is a legal document that allows individuals to transfer their property into a trust while they are still alive. This way, when they pass away, their property can be distributed according to their wishes without having to go through the probate process, which can be expensive and time-consuming. This legislation made estate planning easier and less costly for the families of homeowners.

Home Equity

Another benefit of the Garn-St Germain Act was that it made it possible for homeowners to take advantage of the equity in their homes. Home equity is the difference between what a homeowner owes on their mortgage and the current value of their home. The act allowed homeowners to borrow against their home equity, giving them access to funds that they could use for a variety of purposes, such as home repairs or college tuition for their children.

Due-on-Transfer Clause

Prior to the Garn-St Germain Act, banks had the power to enforce "due on transfer" clause, a provision requiring homeowners to repay the entire outstanding balance of their mortgage upon transferring ownership. Since moving a home to a trust is technically a transfer, this was highly concerning to homeowners wanting to protect their assets. However, the enactment of this legislation effectively reduced bank's authority to enforce the clause when transfers were executed into a living trust that was under the management and control of the homeowner. This key provision within the Garn-St Germain Act not only protects homeowners from the burden of immediate repayment but also empowers them to utilize living trusts as a valuable tool for estate planning, ensuring a smoother transfer of property to loved ones and preserving long-term financial stability.

In Conclusion

The Garn-St Germain Act brought about several benefits for homeowners, including easier access to mortgages, the ability to borrow against home equity and simplified estate planning. These changes helped to make homeownership more accessible and affordable for many Americans, and they continue to shape the real estate industry today.

About the Author

Leslie has been practicing law since 2009 and is the host of the estate planning podcast 'Legacy Purse'. She has a long history of representing family members struggling to inherit property and/or wealth from deceased family members through the Probate Courts. Knowing how time-consuming and expensive the probate process is, Leslie takes great pride in helping her clients learn how to plan and protect their families during their lives so they can avoid the probate court process and save their loved ones that additional grief (and expense).


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