[WSBAPT] Garn-St. Germain & RLT

Thu Aug 22 16:01:28 PDT 2024

I agree with Brent and Laura on the law. Exception 8 is not relevant and is confusing the analysis. (Ann, the “rights of occupancy language” is not even relevant or needed for this exception not to work. That language is stating the ADDITIONAL requirement that the Father in this case not only be beneficiary but also the occupant.) This exception protected HIM during life lifetime occupancy of the mortgage residence for HIS transfer into HIS living trust, say.

A different exception protects daughter as inheritor from father. But exception 8 does not “add on” to the exception for inheritance from a father. Exception 8’s own terms make it irrelevant to this situation – the daughter is not the borrower, period, end of analysis. (Stated otherwise, Eception 8 is relevant is daughter REFINANCES into her own name after taking title via PR Deed; and after recordation of the refi, THEN deeds into her own RLT. That is not the scenario here.)

HOWEVER, I am guessing the practical reality may be that nothing will happen if the property is deeded out to her via PR Deed (protected); the mortgage is paid faithfully; and the daughter’s subsequent deed conveying her interest (under the PR Deed) to her RLT – and it must FOR SURE include after-acquired title – just sits “of record” waiting to take legal effect one day when the reconveyance (on the original deed of trust securing the loan) is recorded, reconveying title to the father after payoff (and instantaneously to the daughter via PR Deed and to her RLT via her deed to trust including after-acquired title language).

And, if the bank squawks earlier, then she will have to sell or refinance, but is PROBABLY no worse off than if she sells or refinances now.

But of course she could also just CALL the lender to ask what their practice is and find out if I’m incorrect or correct about the “practical reality” separate from the statutory analysis.

Best, Josh

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Ann Manley
Sent: Thursday, August 22, 2024 2:03 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Garn-St. Germain & RLT

Exception 8 says: "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."

Does this mean the property owner must retain the right to occupy the property?

Ann Manley, Esq.
The Manley Law Firm, P.S., Inc.
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On Thu, Aug 22, 2024 at 12:53 PM Brent Williams-Ruth <brent at williams-ruthlaw.com<mailto:brent at williams-ruthlaw.com>> wrote:
I have not personally come across this, but given that Exemption #8 specifically states that it is OK to go into trust so long as the borrower is the one beneficiary, I would surmise that it does not protect the transfer.Definitely worth reading the entire statute though (I created a cheat sheet with just the 9 exemptions away from the rest of the statute.

Brent Williams-Ruth (pronouns: he/him)
Attorney-At-Law

Law Offices of Brent Williams-Ruth, a division of BWR Consulting, PLLC

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On Thu, Aug 22, 2024 at 12:36 PM Morgan Madison <morgan at madeira-legal.com<mailto:morgan at madeira-legal.com>> wrote:
Hello list:

Client inherits Washington real property subject to mortgage (inherited from her father). Client resides in California and owns real property in California in a revocable living trust. Client would like to add the Washington real property to her California trust.

Does the Garn-St. Germain Act protect the transfer to her trust from triggering the due on sale clause of the mortgage?

Thank you,
Morgan

Morgan K. Madison
ATTORNEY

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253.222.7778

3812 North 26th Street, Suite B
Tacoma, WA 98407

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