If your property is encumbered by a mortgage, then your mortgage likely limits transferring the ownership of the property. A “due on sale” clause is included in most mortgages, which can cause your entire mortgage balance to become due immediately if you transfer the property without your lender’s consent, but there are exceptions. One such exception to a due on sale clause is transferring your property to your revocable living trust where you remain a beneficiary and you do not transfer the rights of occupancy in the property.
The exception for revocable living trusts can be found in a federal law called the Garn-St. Germain Depository Institutions Act of 1982. The Garn-St. Germain Act at 12 U.S.C. Section 1701J-3(d)(8) provides that a due on sale clause in a mortgage will not apply to “a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.”
If you are transferring your property to your revocable living trust, you are a beneficiary, and you are not transferring the rights of occupancy of the property, then transferring your property encumbered by a mortgage to your revocable living trust should not be a problem.
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