Refinance Your Heirs into a Probate

People throughout California create revocable living trusts to avoid probate Court after death. It’s smart. It’s simple economics. If you have a $500,000 gross estate probate will be over $15,000 after your death.  Having a living trust, which may cost $2,500, will avoid probate. That doesn’t even factor in the emotional cost of probate. Just simple economics says living trust good and probate bad.  However, many people have been lured by incredibly low interest rates to re-finance their homes. Typically mortgage companies will not loan money to a trust and thus the title and escrow companies require a deed to be signed which pulls the house OUT OF THE TRUST.  Most title companies are not good about preparing a deed to put the house back IN to the trust. Likewise, many people do not realize this is required.  After death they are often forcing their heirs into probate court!

I have seen cases which compound this problem. That is, where a husband and wife are married, but the re-fi is done in one spouse’s name alone.  Thus title is taken out of the trust and put into the name “John Smith, A Married Man as his sole and separate property.”  As you might have guessed this can cause a probate Court visit upon John’s death as there is no automatic passing to the surviving spouse with this titling. It’s not in a trust, it’s not joint tenancy and it’s not community property with rights of survivorship. Even worse, a spousal property petition can be not used since the distribution, by the pour-over will, is typically to the revocable trust and a trust is not a “spouse” and thus a spousal property petition does not work. Thus, many times the grieving widow is looking at a full probate!

Luckily in some cases we can file a probate code 850 “Heggstad petition” to expedite the transfer of the home back into the trust after death.  This is a probate court petition which resolves the problem much quicker than a full probate and for far less money.  However, it is still a visit to the probate court and still costs a lot of money.  The key is making sure your home, and other assets, are properly titled in your trust.

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