Asset Ownership

by Layne T. Rushforth

Your assets should be titled in the name of the person or entity you want to control the asset. If, for example, you have a limited-liability company (LLC), assets to be controled by the LLC should be owned by the LLC. Similarly, assets to be controlled under the terms of your living trust should be owned by the trust or have the trust named as a beneficiary or transfer-on-death beneficiary. Traditionally, the title to trust assets has been held in the name of the trustee or trustees of the trust, but Nevada law (NRS 0.039) recognizes a trust as a legal "person", and it is legal in Nevada to own assets in the name of the trust itself.

If property is insured and/or mortgaged, you should not transfer the property without first consulting with the insurance company and/or mortgage company to avoid creating problems.

A transfer of a mortgaged home to a trust rarely causes problems if the settlor (creator) of the trust is also the beneficiary of the trust, and the settlor's right to occupy the property is unaffected. In such a situation, a "due-on-transfer" clause cannot be triggered under the Garn-St Germain Depository Institutions Act [12 U.S.C. 1701j-3(a)(2)], which is a federal law. The regulations adopted pursuant to that Act provide that the due-on-transfer provision cannot be triggered by "a transfer into an inter vivos trust in which the borrower is a and remains the beneficiary and occupant of the property, unless, as a condition precedent to such transfer, the borrower refuses to provide the lender with reasonable means acceptable to the lender by which the lender will be assured of timely notice of any subsequent transfer of the beneficial interest or change in occupancy." [12 C.F.R. Ch. 591.5(b)(1)(vi)]

While a transfer of mortgaged property to a revocable trust is generally no problem, a transfer of mortgaged property to an LLC, partnership, corporation, or other business entity may allow the lender to call the loan due, forcing you to refinance the property or even disqualifying you from having a mortgage.

If you put insured property into a trust (such as a home or vehicle), contact your insurance agent to see if the policy needs a "rider" or other change to make sure that the trust is a proper "insured party".

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