Legal Question in Wills and Trusts in California
original question:
father in laws house is in a trust, he then took out a loan on the house for most of it's value and gave it to his son, since that time his daughter and I have moved in, and made a verbal agreement to pay for our share of the house, and paid most of the mortgage payments and all of the house expenses, after he passes, we can assume the loan I have found out.
can the executer of the trust ( his other daughter ) now sell the house if we hold the loan mortgage on it?
answer:
Scott Jordan Dunning Law Firm San Ramon, CA
Based on what you have written, you do not "hold the loan mortgage", the bank does. The bank presumably has a security interest in the house and must be paid off before they will release the property to any new buyer. You have been paying the mortgage, similar to rent. Title to the property is held and owned by the trust and the trustee probably has the power to sell or keep the property, unless you have a life-estate or some other beneficial right in the property. Paying the mortgage does not give you that right, by itself.
Thank you for the response, but it did not answer my question, so allow me to rephrase and clarify it.
If and when my father in law passes away, and my wife and I assume the loan on the house in our names, would this in any way prevent or stop the trust executor from being able to sell the house without our permission or participation while our names are on the mortgage loan paperwork?
( He dies, we have the mortgage put into our names and continue to pay it, does that give us any kind of protection from eviction from a trust sale, as we have lived here for years and paid the bills per a verbal agreement to make the payments, and the payments are to count towards buying the house, with my father in law, and this agreement is not in the trust paperwork )
2 Answers from Attorneys
What you think you have found out is not correct. So you have to start there. I'm not sure where you "found out" you could assume the loan. Unless title to the property is put in your name, you cannot assume the loan. The law protects heirs who receive title to property by will or a trust distribution, or the trustees of trusts that call for property to remain in the trust, from having to pay off the existing mortgage when the owner dies. ONLY the person or people who receive title to the property via the will or trust distribution, or the person or people who are the successor trustees for property that stays in a trust, qualify for that assumption. Not only will no lender allow a person to assume a loan on property they do not receive title to, it would be a major violation of banking regulations. So whomever told you that you could assume the loan either believed you were talking about assuming a loan on property that you would get title to, or they just did not know what they were talking about.
Now the additional information you provided adds a further twist to this. You say you have a verbal agreement that the payments you have made and are making "count towards buying the house." That agreement is of zero force or effect. Agreements regarding purchase, sale, encumbrance or transfer of real property must be in writing and signed by the parties to the agreement, or it is as if they don't exist.
So the bottom line for you is that at this time, and until you have a legally binding agreement that you will get the house when he dies, you are nothing but at-will month-to-month tenants in the eyes of the law, and that is all you will be if he dies before you get a binding written agreement in place.
I think you are confusing a loan with having title. If title to the house is in the name of the Trust then the Trustee will follow the directions of your father-in-law as expressed in the Trust.
For example, the Trust may leave everything equally to the son and your wife. Ordinarily the Trustee would sell the property and distribute the proceeds to the beneficiaries if the Trust. Because you have been living in the house and paying the mortgage, etc.... this probably seems unfair. But unless the Trust is amended to make a specific bequest of the property to your wife, there is no guaranty how things will turn out.
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