Does a note on a house affect a trust?

1 answer | Last updated: Apr 22, 2013
A fellow caregiver asked...

My mother put her assets, including her house, in trust for my brother and me. The house still has a $57,000 note on it. Does this affect the trust?

Expert Answers

Liza Hanks is the founder and owner of FamilyWorks Estate Planning, a law firm with offices in Campbell and Los Altos, California, and the author of The Busy Family's Guide to Estate Planning (Nolo, 2007).

If your mother put her assets into a living trust to use for her own benefit during her lifetime and then left those assets to you and your brother, the two of you will get the house--along with the mortgage on it--at her death.

You and your brother can then either sell the house and pay off the remaining note, or negotiate with the lender to assume the loan yourselves.

If you are concerned about whether transferring the house into a living trust affects the mortgage right now, the answer is no. The lender does not care that the house is in a trust. And if your mother doesn't pay the mortgage on the house, the lender can still take it, trust or no trust.