A client recently came to my office to help him with his mother's estate. She passed away earlier this year, and he was trying to distribute all the assets according to her living trust's instructions.
During the distribution of the estate, my client discovered his mother got a "reverse mortgage" on her house about 3 years ago. In order to facilitate the loan, the lending company took the house OUT of my client's trust and put it into her name alone. Some lending institutions still insist on doing things this way. I'm not sure why some lenders are more sophisticated than others, but some insist on doing things the "old fashioned" way.
So what did they do? After they put the home in her name and got the reverse mortgage in place (and presumably got their fees), they left the home OUT of the trust. When she died, the house was only in her name, thereby forcing the family to go to court. If the house had been titled in the name of the trust (as it should have been), my client's family would have been able to avoid the probate court system altogether.
So what is the lesson learned? If you are entertaining a refinance, or you are in the middle of one, make sure your lender doesn't leave you out in the cold.
If they are going to start the job, they should also FINISH the job and put your real estate BACK into your living trust.
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