[WSBAPT] Due on Sales Clause and transfers to trust

[Lovie Bernardi]

Thanks, Jennifer. That was my thought as well on the lack of occupancy.
I found an unreported federal case that ruled against the bank on that
issue, but it seems like a risk. I like your suggestion on the transfer
on death deed, Kate, especially if the banks are unwilling to approve
the transfer.

 

From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Jennifer Y. Sohn
Sent: Monday, February 02, 2015 2:31 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Due on Sales Clause and transfers to trust

 

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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