[WSBAPT] Due on Sales Clause and transfers to trust

[Jennifer Y. Sohn]

I would review the deed of trust and any other loan documents. My experience
has been that most commercial banks (including Chase) doesn't care too much,
or will approve the transfer upon request, but I recently had a lender (a
fannie mae loan) call a loan for transferring assets to an RLT.  If there
are more than 1 properties I would presume the non-residence property will
not fall under the (d)(8) exception.

 

From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Lovie Bernardi
Sent: Monday, February 2, 2015 1:54 PM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Due on Sales Clause and transfers to trust

 

Dear listmates:

 

I have a client whose wife passed away. The couple owned multiple properties
in Idaho and Washington, most with substantial mortgages. The wife had been
living in Washington for medical treatment for many years when she passed
away while the husband lived in Idaho most of the time. We filed a probate
here in King County and an ancillary probate is being handled by an attorney
in Idaho. The will instructed the PR (husband) to place the wife's portion
of the community property in a living trust that was established before her
death. She died before any of the property was transferred to the trust,
hence the two probates. Interestingly, the trust did not become irrevocable
upon the death of the wife.

 

The husband wants to transfer both his wife's interest and his interest in
the properties to the trust, in order to avoid a double probate at the time
of his own death. (He will probably still be an Idaho resident.) My concern
is whether the transfer will trigger the due on sale clauses in the
mortgages. Most of the mortgages are with Chase. I have reviewed the
exemptions from the due on sale clause under 12 USCS Section 1701j-3(d). The
transfer of the wife's interest falls under exemption (d)(3) ("a transfer by
devise, descent, or operation of law on the death of a joint tenant or
tenant by entirely"). But does the husband's transfer of his interest fit
under (d)(8) ("a transfer into an inter vivos trust in which the borrower is
and remains a beneficiary and which does not relate to the transfer of
rights of occupancy")?

 

Am I safe to transfer both the wife's interest and the husband's interest in
the properties without triggering the due on sale clause? I attended a trust
CLE last August which suggested the transfer of real estate to a trust
during lifetime might trigger the due on sale clause. Does anyone have
experience with this issue and/or suggestions for me? Thank you in advance
for your input.

 

 

Lovie Bernardi

Attorney at Law

Seligmann & Flaherty, PLLC

216 First AVE S, #450

Seattle, WA  98104

(206) 682-2616

 

lovie at sbfirm.com <mailto:joni at sbfirm.com> 

http://sbfirm.com <http://sbfirm.com/> 

 

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