Legal Question in Real Estate Law in California

Re: Home equity loan on house in a trust

It makes sense. Most people who set up a trust do not use a trust company unless it is an irrevocable trust and has a million or more in assets. Whether you have an attorney do this depends upon your comfort level in doing it yourself. Get my book. It is written to tell non-lawyers all they need to know to do this stuff themselves and contains plain English forms a well. After you read the book, you will be in better place to determine if you want lawyer assistance or not, and even if you opt for this, it will make the lawyer assistance more affordable since the lawyer won't have to educate you.

You can find the book at www.IWant2CreateMyLegacy.com.

Re: Home equity loan on house in a trust

Let me answer question number 3 first. You do need an attorney. Anyone other than an attorney, i.e. a "trust company" that prepares or "sets up" a trust is practicing law without a license and can be incarcerated for committing a misdemeanor.

In response to question number 2, you will be able to get an equity line of credit if the house is in a revocable trust.

In response to the first question, If you put the property into a trust, it will not lose its separate property character, so long as your husband is not a co-trustee. But be advised that if any taxes are paid on the property then your husband will acquire a community property interest in the property, which may not matter as you want to give the property to him anyway.

Re: Home equity loan on house in a trust

Who is advising you on the trust's creation? Trust companies' traditional role is to hold trust property as trustee, not to set up trusts for the grantor(s). Perhaps some do. Creating a trust for someone else is the practice of law and should be done by someone who is licensed to do so. So, that's my preliminary caution!

OK, to answer your questions:

#1 makes sense in principle. You should get independent legal advice from an attorney working for you as to how best to accomplish your goals without compromising your separate-property holding of the house for the time being, and I think you want an estate-planning attorney and my guess is that he or she will suggest two separate but coordinated trusts.

#2, having the house in a revocable living trust will have little to no effect on your ability to borrow on it. Lenders are accustomed to this. The paperwork is very slightly different. Remember, however, if the house remains your separate property, whether in your trust's name or your own name, the lender will be looking primarily to you for the ability to make the payments, since you would be the named borrower. In real life, the lender will also probably be influenced by the quality of the collateral and the couple's joint financial strength and reputation.

#3. If you are already dealing with a trust company, ask an officer of the company if their proper role extends to advising clients on their trust needs and preparing trust documents. If you are comfortable that the trust company is using lawyers to do this work, and that the lawyers are working for you as your fiduciaries, then go ahead. Otherwise, use an independent attorney who does a lot of estate-planning and trust-drafting work. Whether you and your husband need separate attorneys is another issue. Probably not, if you share the same ideas and goals now, especially if neither of you has children by a prior marriage. However, an attorney representing both of you should at least mention that you might want to consider separate representation and are entitled to the same.