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Estate Planning Refinancing

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cchung1263

Junior Member
What is the name of your state (only U.S. law)? CA

My dad passed away last year and my mom has title on her home through joint common tenancy.

To assist her to refinance the existing mortgage and cash out for some home improvements, we are looking to refinance for $375,000 @4.375% over 30 years. The house has value over $510,000.

One of the siblings raised a good question that in the horrible event of my mother's death, how can we protect the property (from probate) and is there a way of keeping the loan. What we also want to avoid is having to refinance in the future upon her death at a higher interest rate.

We were considering on creating a living trust and living will. But I don't know if that also accommodates our concern about keeping the loan. Is there a recommended process such as to refinance, create a living trust, and transfer title of property into the living trust that would also keep the loan? Any suggestions? Your responses are greatly appreciated.
 


TrustUser

Senior Member
you can place the property into a trust without invoking the due on sale clause. this will keep it out of the clutches of probate.

the following is some guesswork. hopefully some others will chime in.

i dont think a bank would normally try to call the loan, once your mom dies, assuming you keep the payments current.

whether they can or not, i am not sure - but they have a heckuva lot more important issues with other loans that are not being kept current, such that i think it is unlikely that they would bother messing with the apple cart on a good paying loan.

but you know - since you have not yet gotten the loan, it is an excellent question to ask the financial officer of the bank. heck, it may be an option that can be negotiated between you and the bank, where you have that situation answered in writing.

it is good that you have given your situation some thought, cuz you then are better prepared for what sort of loan/options works best for your situation.
 

anteater

Senior Member
California really needs to do something about probate. The OP wants to "protect the property from probate." And TrustUser talks about the "[evil?] clutches of probate."

Maybe the legislature needs to authorize an ad campaign:

"Probate - It Ain't as Bad as You Think."

"What Happens in Probate Stays in Probate!"
 

TrustUser

Senior Member
hi ant,

unfortunately, i have some investments in the capital city. it is because of this, that i have become keenly aware of just how crooked our govt actually is.

whether other states are that bad or not, i dont know. but one may need to actually be involved within the capitol to really know how they operate.

i have nothing good to say about our state govt. at one time, schwarzenegger had the politicians by the thumbs, and might have been able to do something.

he was proposing to make the council part-time, etc., things that would make the govt less powerful. the voters failed to pass any of his referendums, and along with that went any power for him to do anything.

ten years ago or so, we had the ability to vote in vouchers for schooling. the school system, with all its highly paid administrators, spent so much money that their ads were constantly flooding the airwaves.

they did a wonderful job of scaring the public into thinking that the kids would no longer get a good education. what a joke. what it actually would have done would place competition amongst the schools to actually perform well.

one thing that becomes apparent to somebody, as they get older, is how corrupt big groups are. their only real concern is their financial wealth. the bigger they are, the more corrupt they are.
 

cchung1263

Junior Member
Living Trust and refinancing

Thank you for your responses.

Anteater, I'm not quite sure I follow you. What is OP? Are you saying probate is good or bad?

Trustuser, thank you for your input.

Has anyone used Legalzoom.com before to create a living trust and will?
 

anteater

Senior Member
Thank you for your responses.

What is OP?
Shorthand for Original Poster - in this case, you.

Anteater, I'm not quite sure I follow you... Are you saying probate is good or bad?
I was just kidding and tweaking TrustUser some.

Probate is neither good nor bad, just as living trusts are neither good nor bad.

In California, probate tends to be formal, often drawn out, and relatively expensive. That's one reason that living trusts became so popular there. In other states, probate isn't so onerous.
 

FlyingRon

Senior Member
The loan can't be called or modified just because of the death of the borrower as long as someone is paying it. You need not worry about that.

A trust will avoid probate, but there really isn't enough information here to make a recommendation for or against it. Certainly a LEGAL ZOOM will/trust is probably not the right way to go about it. By the way, just creating a trust doesn't do squat unless you deed the property into it.

While probate is an expense, it has no bearing on the mortgage or the tax issues, nor does a trust fix these issues.
 

cchung1263

Junior Member
Oh thank you.

But I understand that there is a cost for probate in which the State will take a percentage to administer probate, thereby causing unnecessary cost that could have been avoided by having a will or trust. Is that correct?
 

FlyingRon

Senior Member
Oh thank you.

But I understand that there is a cost for probate in which the State will take a percentage to administer probate, thereby causing unnecessary cost that could have been avoided by having a will or trust. Is that correct?
A will must be probated, the only thing that a will does is direct actions different than the intestate succession laws.

The state doesn't take a percentage, the lawyer that handles the probate gets paid for his services which is capped at a value which is determined by the net value (assets less the debts) of the estate. It starts out at 4% for a $100,000 estate and steadily decreases as a percentage as the estate gets larger.

California doesn't tax estates or inheritances anymore.
There's no federal inheritance tax, but the rules for federal tax on estates changes from year to year. Currently there's a million dollar exclusion, but it changes for 2011 (unless they tinker with the law again).
 

cchung1263

Junior Member
Thank you for your valuable input. One last question, does a living trust and living will avoid probate?

Thank you again.
 

anteater

Senior Member
Thank you for your valuable input. One last question, does a living trust and living will avoid probate?

Thank you again.
Just to add something to what Ron said... There are fees charged by the court for probate.

A "living will" is another name for an advance healthcare directive. In basics, it gives instructions regarding medical decisions if you are no longer capable of making those decisions.

A living trust does avoid probate, which is one of its advantages. But, as Ron mentioned, property does need to placed in the trust.

The website below is for Santa Clara county, but most of what is there is applicable to California in general. It has some nice information that may help you understand probate. If you look in the left hand pane, there is also a link to a page that provides some info on trusts.

http://www.scselfservice.org/probate/
 

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