[WSBAPT] House for surviving spouse

[James W. Spencer]

Greetings Paige:

See 12 U.S. Code § 1701j–3(d) (part of the Garn-St. Germain Act):
(d) Exemption of specified transfers or dispositions. With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—
(1) the creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;
(2) the creation of a purchase money security interest for household appliances;
(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(4) the granting of a leasehold interest of three years or less not containing an option to purchase;
(5) a transfer to a relative resulting from the death of a borrower;
(6) a transfer where the spouse or children of the borrower become an owner of the property;
(7) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or
(9) any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board

Best wishes,
James

James W. Spencer
Brothers & Henderson, P.S.
2722 Eastlake Avenue East, Suite 200
Seattle, Washington 98102
Phone: (206) 324-4300 x106
e-mail:  jamess at brothershenderson.com<mailto:jamess at brothershenderson.com>
www.brothershenderson.com<http://www.brothershenderson.com/>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Paige Buurstra
Sent: Thursday, November 15, 2018 10:08 AM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] House for surviving spouse

Hello all,

I have a client who owns a home as his separate property. He is in his seventies and recently got remarried. He has 2 children from his first marriage. He wants to allow his current spouse to live in the home for up to 5 years after he passes. There is still a mortgage on the home. Wife would be responsible for paying the mortgage. At the end of 5 years or when Wife decides to move out, He then wants surviving spouse to receive 20% and each child to receive 40% of the equity. (this is not a taxable estate)

My first inclination is to create a living trust and transfer the house into the trust, including the period of years and ultimate disposition in the trust terms. However, my concern is that at the time of client’s death, we publish notice to creditors, the mortgage company is on notice that client is deceased and calls note due so that house must be refinanced or sold. Children will not want to be on the hook for a mortgage that wife is obligated to pay. Mortgage co would not likely lend to the trust.  Essentially, lender could force the sale right away, thwarting the purpose of the trust.

Has anyone run into this or have any other ideas or suggesetions?

Thanks,
Paige Buurstra
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