In Texas, the use of revocable living trusts is not as usual as in other states. However, when a Texan owns real estate in another state, then it can be advantageous to place that real estate in a revocable living trust. If you own a vacation house or other real estate outside of Texas and decide to put that property into a trust, consider that life is long and you may end up refinancing your house, but if you do, does it get taken out of the trust?
Typically when you refinance a house held in a living trust, the lender will require the owners to take it out of the trust in order to get the new loan. After the loan, you can then transfer it back in. Most often this is the case because the loan officers want to check your individual credit ratings, but it depends on the lender. Some lenders are willing to give a new loan without the living trust shuffle being necessary. However, if you are refinancing, you should expect to have to create and record the deed transferring out of the trust in order to qualify for that loan.
Frequently, owners forget to close the loop on this process by executing the deed after the refinancing to place the house back in the trust. Because placing your vacation home into trust can allow you to avoid probate outside of Texas, it is important to remember to take this final step.
If you have held off putting your vacation house in your living trust because you think you might need to refinance someday – Don’t. Taking a house out and putting it back in is actually a relatively painless process, and a good lawyer can help walking you through the process. If you need to set up or manage a trust, contact us today.