deed/trust issue

[abcd12]

What is the name of your state? New York

I am on a deed(Warranty deed with lien covenant) as 1% owner, my parent is the other 99% owner on the deed and we are listed as Tenants in Common. The 99% ownership was transferred to a trust. I am now being asked to transfer my 1% ownership to the same trust. The thought being is to avoid probate in case my I pass before my parent, I would have several heirs. The deed also has a sizeable mortgage on it , of which I was a co-signer.

If I transfer my ownership, i feel that i would have lied to the bank. Is there any way for me to setup my 1% ownership so that when I die my 1% goes to my parents trust?

 

[Taxing Matters]

You have several options here. You may provide in your will or your own individual trust that holds your interest in the property that your share of the property goes to the trust after you die. I mention you forming your own revocable living trust to hold your share because in general in NY probate tends to drag out for awhile and also gets expensive. A revocable living trust would keep your share of the property from ever going to probate. That would allow the transfer to occur faster and usually with less cost.

You may also make the transfer to the trust now without violating any provision in the loan contract containing what is known as a "due on sale" clause if the transfer is to a living trust (which lawyers call an inter vivos trust) in which you are, and will continue to be, a beneficary of the trust. This rule is provided by a provision of the federal Garmin-St. Germain Act of 1982 and is codified in federal law at 12 U.S.C. § 1701j-3(d)(8). So, done properly, the bank won't lose it's position as a creditor by the transfer and would be barred from triggering the due on sale clause. A due on sale clause is one in which the lender may call the entire loan due immediately if the property is transferred out of the ownership of the borrower without first getting approval from the lender for a transfer. You will almost certainly see such a provision in your loan contract. That federal blunts the impact of those clauses in certain situations specified in the Act, all of which share the feature that the lender's interest in the property would not be adversely affected.

How to you figure that by doing this, you will have lied to the bank?

You might want to see a NY estate planning or property lawyer for advice on what is best for you to do given the terms of your parent's trust.

 

[abcd12]

You have several options here. You may provide in your will or your own individual trust that holds your interest in the property that your share of the property goes to the trust after you die. I mention you forming your own revocable living trust to hold your share because in general in NY probate tends to drag out for awhile and also gets expensive. A revocable living trust would keep your share of the property from ever going to probate. That would allow the transfer to occur faster and usually with less cost.

You may also make the transfer to the trust now without violating any provision in the loan contract containing what is known as a "due on sale" clause if the transfer is to a living trust (which lawyers call an inter vivos trust) in which you are, and will continue to be, a beneficary of the trust. This rule is provided by a provision of the federal Garmin-St. Germain Act of 1982 and is codified in federal law at 12 U.S.C. § 1701j-3(d)(8). So, done properly, the bank won't lose it's position as a creditor by the transfer and would be barred from triggering the due on sale clause. A due on sale clause is one in which the lender may call the entire loan due immediately if the property is transferred out of the ownership of the borrower without first getting approval from the lender for a transfer. You will almost certainly see such a provision in your loan contract. That federal blunts the impact of those clauses in certain situations specified in the Act, all of which share the feature that the lender's interest in the property would not be adversely affected.

How to you figure that by doing this, you will have lied to the bank?

You might want to see a NY estate planning or property lawyer for advice on what is best for you to do given the terms of your parent's trust.

In the mortgage agreement(security instrument), there is a copy of the deed with my name on it. In the agreement I certify all information is correct, if I misrepresent anything the bank could consider the loan in default. My parent did not qualify for the loan without me co-signing for it. I like the the idea of the trust. I see other states allow Transfer on Death deeds, I guess New York does not.