Can a revocable/grantor trust hold a mortgage note?

Can a revocable/grantor trust hold a mortgage note?

goorgle@hotmail.com (Alex Goorgle)	7/18/2004 4:04:59 PM
Suppose an individual owns a home financed by a typical 80% mortgage. Therefore the individual has an ownership interest (commonly known as equity) of 20% of the home's value. For the purposes of tracking his/her assets (e.g. to avoid commingling of his/her current ownership interest with ownership interests acquired thru mortgage payments made from certain sources in the future), can the individual grant into the Trust a Mortgage Note (effectively a second mortage), secured by his/her 20% interest, and then pay it off over time from non-trust sources? Is this an effective substitute for a pre-nuptial agreement if the home equity is that person's only significant asset?



Stuart Bronstein	7/20/2004 3:18:28 PM
Alex Goorgle wrote: Suppose an individual owns a home financed by a typical 80% mortgage. Therefore the individual has an ownership interest (commonly known as equity) of 20% of the home's value. So far so good. For the purposes of tracking his/her assets (e.g. to avoid commingling of his/her current ownership interest with ownership interests acquired thru mortgage payments made from certain sources in the future), can the individual grant into the Trust a Mortgage Note (effectively a second mortage), secured by his/her 20% interest, and then pay it off over time from non-trust sources? This makes no sense to me. Does this mean you put 20% down, but someone else is paying off the mortgage, so that you will always own 20% but the other person will own all the rest? Why in the world would anyone enter into an agreement that says that? Is this an effective substitute for a pre-nuptial agreement if the home equity is that person's only significant asset? A trust can hold anything that you can. A trust does not, generally, protect your property from your creditors or a spouse. Stu



cj.green@worldnet.att.net (Christopher Green)	7/20/2004 3:18:40 PM
goorgle@hotmail.com (Alex Goorgle) wrote in message news:<gillf016pq5732s3ti196epdmce63r51ps@4ax.com>... Suppose an individual owns a home financed by a typical 80% mortgage. Therefore the individual has an ownership interest (commonly known as equity) of 20% of the home's value. For the purposes of tracking his/her assets (e.g. to avoid commingling of his/her current ownership interest with ownership interests acquired thru mortgage payments made from certain sources in the future), can the individual grant into the Trust a Mortgage Note (effectively a second mortage), secured by his/her 20% interest, and then pay it off over time from non-trust sources? Sounds to me like a scheme for converting community assets into separate ones. The only way it would pass muster (in a community property state with tracing rules, such as California) is if the "non-trust sources" were separate property. You can't spend community assets to carry separate property. Is this an effective substitute for a pre-nuptial agreement if the home equity is that person's only significant asset? Probably not. If you're dealing with a community property state, they tend to regard everything acquired or paid for during a marriage as community property, except to the extent that it's excluded by a prenuptial agreement or traceable to separate property. For example, you could agree in the prenuptial agreement that ownership of the house is going to be as tenants in common, with a 60/40 split. Beats heck out of subterfuges involving self-dealing with a trust. If this means a lot of money to you, see a lawyer who does family practice and get it done right. Do-it-yourself schemes involving ownership or inheritance of property often come to grief. -- Not a lawyer, Chris Green



"Arthur L. Rubin"	7/20/2004 3:18:55 PM
Alex Goorgle wrote: Suppose an individual owns a home financed by a typical 80% mortgage. Therefore the individual has an ownership interest (commonly known as equity) of 20% of the home's value. Wrong. This is a LEGAL newsgroup. "ownership interest" and "equity" are two different things. For the purposes of tracking his/her assets (e.g. to avoid commingling of his/her current ownership interest with ownership interests acquired thru mortgage payments made from certain sources in the future), can the individual grant into the Trust a Mortgage Note (effectively a second mortage), secured by his/her 20% interest, and then pay it off over time from non-trust sources? He/she can DO that -- but there's no 20% interest. The mortgage is secured (if it at all) by an undivided full interest in the property. Is this an effective substitute for a pre-nuptial agreement if the home equity is that person's only significant asset? It doesn't appear to gain him/her anything along those lines. -- This account is subject to a persistent MS Blaster and SWEN attack. I think I've got the problem resolved, but, if you E-mail me and it bounces, a second try might work. However, please reply in newsgroup.

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