Revocable trust, property with lien

[viper515]

Jurisdiction

Kansas

I am at the planning stage of setting of a revocable trust for my estate and assets. The only thing that has a lien is a large acreage ag property. As it stands right now, I am the sole owner of all property discussed. My concern with the land is in the event of death, it may go to probate and ultimately back to the lender! I am trying to learn what options I may have? I know on another property for someone else, they bought an insurance policy that would pay off the property, but I am not sure if that only covers natural death or whatever. Basically sneaky ways insurance may not pay.

I have family that would gladly either take over payments or just refi in their own name. I also know private people that would lend cash just to get it done if it came to that. My biggest concern is how the lender handles this but they won't have that convo with me!

I was hoping to simply put another party on with the lender, but I think that would subject them to a reportable debt, which I don't desire.

I also own other valuable assets that don't carry a title, such as heavy equipment. I am hoping that is as simply as documenting the serial numbers within the trust instrument?

 

[zddoodah]

My concern with the land is in the event of death, it may go to probate and ultimately back to the lender! I am trying to learn what options I may have? I know on another property for someone else, they bought an insurance policy that would pay off the property, but I am not sure if that only covers natural death or whatever. Basically sneaky ways insurance may not pay.

This is incredibly vague and more than a bit scattered.

If you buy a policy of insurance on your life, it will not be limited to "natural death." That said, are you concerned that someone might kill you? Or, perhaps more importantly, are you contemplating taking your own life? Other than that, I'm not sure what you mean by "sneaky ways insurance may not pay."

If a person owns encumbered property at the time of death, the property does not go "back to the lender." Whoever handles the estate or whoever inherits the property will have to continue paying the encumbrance. Alternatively, if the property is sold by the estate, the encumbrance will get paid as part of the sale. On the other hand, if title to the property is in a trust, the death of the settlor of the trust will not immediately be relevant to the encumbrance as long as the trustee continues paying the debt secured by the encumbrance.

I also know private people that would lend cash just to get it done if it came to that.

Lend cash to whom? Get what done? If what came to what?

I also own other valuable assets that don't carry a title, such as heavy equipment. I am hoping that is as simply as documenting the serial numbers within the trust instrument?

Some "heavy equipment" is titled.

Seems to me that you have sufficient wealth to justify spending money to have an attorney set up your estate plan properly. Otherwise, you risk screwing things up and the result you want not being obtained.

 

[welkin]

I am at the planning stage of setting of a revocable trust for my estate and assets. The only thing that has a lien is a large acreage ag property. As it stands right now, I am the sole owner of all property discussed. My concern with the land is in the event of death, it may go to probate and ultimately back to the lender! I am trying to learn what options I may have? I know on another property for someone else, they bought an insurance policy that would pay off the property, but I am not sure if that only covers natural death or whatever. Basically sneaky ways insurance may not pay.

I have family that would gladly either take over payments or just refi in their own name. I also know private people that would lend cash just to get it done if it came to that. My biggest concern is how the lender handles this but they won't have that convo with me!

I was hoping to simply put another party on with the lender, but I think that would subject them to a reportable debt, which I don't desire.

I also own other valuable assets that don't carry a title, such as heavy equipment. I am hoping that is as simply as documenting the serial numbers within the trust instrument?

Let me give you a piece or friendly advice (definitely not legal advice). What do you care what happens when you're dead? If your heirs can't figure out what to do with all this property, how will it impact a dead man? When you're dead, you have no control of your estate. That is a fact. Trusts and wills can only say what you intended. Not what ultimately happens.

I too, used to ponder the same concerns about my business assets (the equipment, the building) and I came to the realization that whatever happens doesn't matter to me because I wouldn't know what the outcome would be no matter what estate planning I did. I would be dead.

All my brokerage and retirement accounts are TOD and the same with all my bank accounts. That is about as far as I can guarantee. The house, the shop, and all the equipment (about $250,000 in equipment) are part of the estate, and I will have no say to what ultimately happen to it no matter what I write in my will or who my beneficiaries are. I have a ton of very special tools that are very special to me (a lifetime of collecting). But I can guarantee that they will not be special (with an accurate value) to someone else. So, why should I worry about it.

Stop opining about what might happen. Say what you want to happen and be done with it. That is my advice. Then go on and live out the rest of your life.

 

[adjusterjack]

The only thing that has a lien is a large acreage ag property. As it stands right now, I am the sole owner of all property discussed. My concern with the land is in the event of death, it may go to probate and ultimately back to the lender! I am trying to learn what options I may have?

No worries. Kansas is one of the states that allows for Transfer on Death Deeds for real estate.

2023 Kansas Statutes :: Chapter 59 - Probate Code :: Article 35 - Transfer-on-death

Justia Free Databases of US Laws, Codes & Statutes

law.justia.com

Any real estate qualifies and you can find the TOD deeds (AKA Beneficiary Deeds) online. Once completed you have to get them recorded.

My biggest concern is how the lender handles this

The lender won't be able to "handle" anything as long as the payments get made. There is a federal law that prohibits lenders from activating a due on sale clause for intra-family transfers. I keep forgetting the name of it. Others here will know.

Just remember, whoever your beneficiary is, that person should be able to make the payments to keep it, or sell it (since he will own it) and pay off the loan.

I can see that you need some education in how a trust works so please consult an estate planning attorney to get it all set up correctly and teach you how to use it properly.

I also own other valuable assets that don't carry a title, such as heavy equipment. I am hoping that is as simply as documenting the serial numbers within the trust instrument?

For the trust to own anything, ownership of the items would have to be conveyed to the trust by a document. A bill of sale for "reasonable consideration" from your name to the name of the trust would probably suffice but you would be wise to get professional advice on that.

Once the trust has been created, open a checking account in the name of the trust so that the trust can purchase future items for your use.

 

[viper515]

This is incredibly vague and more than a bit scattered.

If you buy a policy of insurance on your life, it will not be limited to "natural death." That said, are you concerned that someone might kill you? Or, perhaps more importantly, are you contemplating taking your own life? Other than that, I'm not sure what you mean by "sneaky ways insurance may not pay."

Likely the later. I don't need mental help though, just trying to get things lined up to make the process smooth.

If a person owns encumbered property at the time of death, the property does not go "back to the lender." Whoever handles the estate or whoever inherits the property will have to continue paying the encumbrance. Alternatively, if the property is sold by the estate, the encumbrance will get paid as part of the sale. On the other hand, if title to the property is in a trust, the death of the settlor of the trust will not immediately be relevant to the encumbrance as long as the trustee continues paying the debt secured by the encumbrance.




Lend cash to whom? Get what done? If what came to what?

I simply mean I know plenty of people that will pay cash the save the property from going back to the lender to going up for sale.


Some "heavy equipment" is titled.

Seems to me that you have sufficient wealth to justify spending money to have an attorney set up your estate plan properly. Otherwise, you risk screwing things up and the result you want not being obtained.

My assets have dwindled massively since Covid (thank you biden, high five) so I don't think things would exceed too much over 6 figures. No one would contest ownership. Actually no one knows half the stuff exists and it's all going to my twin brother so trust is pretty damn tight! Just want to make it smooth for him.

 

[viper515]

No worries. Kansas is one of the states that allows for Transfer on Death Deeds for real estate.

2023 Kansas Statutes :: Chapter 59 - Probate Code :: Article 35 - Transfer-on-death

Justia Free Databases of US Laws, Codes & Statutes

law.justia.com

Any real estate qualifies and you can find the TOD deeds (AKA Beneficiary Deeds) online. Once completed you have to get them recorded.



The lender won't be able to "handle" anything as long as the payments get made. There is a federal law that prohibits lenders from activating a due on sale clause for intra-family transfers. I keep forgetting the name of it. Others here will know.

Just remember, whoever your beneficiary is, that person should be able to make the payments to keep it, or sell it (since he will own it) and pay off the loan.

I can see that you need some education in how a trust works so please consult an estate planning attorney to get it all set up correctly and teach you how to use it properly.



For the trust to own anything, ownership of the items would have to be conveyed to the trust by a document. A bill of sale for "reasonable consideration" from your name to the name of the trust would probably suffice but you would be wise to get professional advice on that.

Once the trust has been created, open a checking account in the name of the trust so that the trust can purchase future items for your use.

From what I gather from you, if a TOD is filed in KS, and a trust created, as long as the trustee continues making payments towards the land interest, nothing can really change? That's probably the best case scenario. I know my family would eventually either refi or pay off the land anyway. I am just trying to protect it to ensure other vultures can't get to it.

As for experience with trusts. No, I certainly don't do estate planning but ended up as party to executor and beneficiary of FIL's trust. I still have every page of it and had to take the fire hose approach to learning about trusts about 10yrs ago. Seems avoiding probate BS is worth the paperwork. I know we didn't visit one court or did anything other than send people death certs, POAs, and executor docs.

Of the many things I learned, having a medical POA can be extremely helpful in life.

 

[zddoodah]

will a life insurance policy pay out for suicidal death - Google Search

 

[adjusterjack]

No need for anybody to bother with that voluminous google search.

The answer is yes, life insurance pays for suicide as long as the suicide occurs beyond the duration of the suicide clause, typically two years from the effective date of the policy.

 

[Tax Counsel]

The lender won't be able to "handle" anything as long as the payments get made. There is a federal law that prohibits lenders from activating a due on sale clause for intra-family transfers. I keep forgetting the name of it. Others here will know.

It's the federal Garn-St Germain Depository Institutions Act of 1982. The part of the Act which prohibits mortgage lenders from from accelerating the loan (which means calling the full amount due immediately) in certain types of transfers is found in the US Code at 12 U.S. Code § 1701j–3 subsection (3). Of course the lender may accelerate the loan if you miss payments. Acceleration will be the first towards foreclosure.

If there is equity in the property, the person(s) to whom you give it in your will, typical revocalble living trust, or transfer on death deed isn't likely to reject it. That person person may decide to just sell it rather than keep it. You don't have any control over that unless you include the terms in the trust to restrict the sale for some period of time. In some cases that kind of clause simply causes a variety of problems for the beneficiary, especially if they have no interest in actually owning and paying all the costs that go along with it.

 

[viper515]

I have not decided on an atty yet, but just a question. With a properly setup trust, would a TOD registers with the deeds office even be needed? It would seem if there is a transfer from personal to trust at deeds office, the trust would handle it from there?

This is assuming moving the property to a trust can be worked out with the lender. Looking up many properties over the years, it seems extremely common to personal real estate transferred to a trust. A TOD is less common to see, at least at the deed's office.

 

[adjusterjack]

With a properly setup trust, would a TOD registers with the deeds office even be needed?

No, the trust eliminates the need for a TOD deed, and vice versa.

This is assuming moving the property to a trust can be worked out with the lender.

Nothing needs to be "worked out" with the lender. The lender has no say in the matter. Read the section that TC provided.

Looking up many properties over the years, it seems extremely common to personal real estate transferred to a trust. A TOD is less common to see, at least at the deed's office.

They are getting more and more popular as states continue to enact legislation allowing them.