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Legalease
Legalease, Lawyer
Category: Real Estate Law
Satisfied Customers: 16288
Experience:  13 years experience in RE Law, including LL/Tenant, contractor disputes, comm'l prop. issues
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Property financed with Chase. Borrower named as my revocable

Customer Question

Property financed with Chase. Borrower named as my revocable living trust. In reviewing closing documents, I see a “Certification and Rider to Promissory Note” and an “Inter Vivos Revocable Trust Rider.” The lawyer who wrote the trust has passed on; I met with the lawyer who took over his practice and asked specifically the meaning of documents ( it lists me as Trust Trustee, Revocable Trust Settler; Chase is the lender - on the Inter-Vivos doc) - - but the Deed of Trust shows definitions of Borrower=Trust, Lender=Chase; but Trustee=Chase. My trusts directs my adult son to act as trustee when I pass - This lawyer indicated he was not sure what the documents meant but suggested I refinance to avoid Chase having the ability to force sale of the property. I’m concerned - How do these documents effect my revocable living trust and do they over-ride my wishes and if so, is there a workaround? Yes I should have reviewed this in detail in July when I closed but it wasn't pointed out and I just signed what I thought was "boilerplate" info.
Submitted: 9 months ago.
Category: Real Estate Law
Expert:  Legalease replied 9 months ago.

Hello there --

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The "Deed of Trust" has nothing to do with your own trust documents or the trust itself -- the Deed of Trust is almost exactly like a mortgage but it operates a bit differently. With a mortgage, the lender would simply foreclose if there is or was a nonpayment issue. However, with a Deed of Trust, the legal theory is that the property is held in TRUST for the benefit of the lending bank. In your case, it appears that Chase made itself trustee AND Lender, which is fairly common and keeps the transaction more like a traditional mortgage situation. However, the term "trustee" in your Deed of Trust (mortgage) is correct and it will not affect your own trust in any manner. Chase will hold the will in "trust" until either the loan is paid off or the lender (also Chase) wishes to foreclose on the property if you every go into default on the loan. Once paid, Chase trustee will sign a release. If foreclosed on, Chase will act as trustee for the lender (itself) and move forward to foreclose.

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THe other two documents are appropriately executed by the trust as you have mentioned above and these documents (Certification and Rider to Promissory Not AND Inter Vivos Revocable Trust Rider) have the correct parties as Borrower and Lender (the ONLY document where a trustee for the lender is used is the Deed of Trust, and all other documents are written appropriately with your Trust as borrower and you as the trustee.

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Please let me know if you have further questions on this matter. If not, can you please press a positive rating above in the rating section so I will be paid for my time assisting you. I am paid nothing unless you press a positive rating before leaving the website (pressing the middle star or the fourth or fifth star on the right are positive ratings). Pressing a positive rating will not cost you any additional money -- it is simply the trigger to Just Answer to pay me for my time. THANK YOU VERY MUCH

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MARY

Customer: replied 9 months ago.
Understanding that the payments must continue to be paid, upon my passing. However, when I pass on, will my adult son (as trustee in my revocable living trust) have any difficulty in changing title - does Chase have any impact on that part (real estate) of the trust? Of what benefit is the inter vivos to Chase? Why did Chase list themselves as "trustee" ? You may have answered that question, but in my "layman" mentality, I'm not sure I do understand. thank you.
Expert:  Legalease replied 9 months ago.

Hello there --

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The trustee in the Deed of Trust is merely a formality -- the way some states developed their property transfer and financing laws were a little bit different from other states. In about 20 states, a document called a DEED OF TRUST was used as the mortgage document (if you notice, there is no mortgage that you are being asked to sign in this transaction -- just the DEED of TRUST) and most of those states still use the DEED OF TRUST as their mortgage document. All lenders in your state use DEEDS of TRUST in lieu of mortgages. The legal theory behind having such an arrangement was to keep the lender and borrower at arms length so the borrower could not claim that the lender used undue influence or other nefarious means to foreclose (this was important to the western states, particularly during the depression). Traditionally, the "trustee" named in the Deed of Trust was a third party, such as an attorney or escrow agent. That evolved into the 1970's and 80's into having the title company act as the "trustee" in the Deed of Trust until we come to the present day where the lender and the trustee can be the same party -- and thus Chase is holding and will hold the Deed of Trust on your property in "Trust" until either the loan is paid off (in which case the Deed of Trust is released (just like a mortgage release)) or the loan is defaulted by the Borrower (in which case Chase, as the trustee, will move to foreclose and once the foreclosure happens, Chase as trustee will resign from the trustee role and sign the property over to Chase as the lender. It is a bit redundant and even silly to handle the mortgage transaction in this manner -- however, because the Deed of Trust is the traditional mortgage form used in CA and about 19 or 20 other states, those states will continue to use the Deed of Trust (as their mortgage document) until the state legislature decides to make a change and set aside the use of the Deed of Trust in favor of the more common document, a Mortgage.

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I am not sure if I can make it any clearer than I have, but I do reassure you that the Deed of Trust document and the trustee named in that document has nothing to do with the Inter Vivos trust that you established for estate planning purposes. Moving forward, your transaction will operate just as a traditional mortgage operates and there is nothing to worry about in that regard. I am also attaching a link to a legal definition website which gives a good explanation of the deed of trust document and its uses. https://www.law.cornell.edu/wex/deed_of_trust There are also many other legal dictionaries online which give similar definitions and there are legal articles and commentary regarding the use of the Deed of Trust Vs. the traditional mortgage if you want to delve into the subject a little more. However, you have absolutely nothing to worry about regarding the Deed of Trust (mortgage) somehow interfering with your own Inter Vivos trust as the Borrower on the loan.

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Regarding the question as to whether or not your son will have any difficulties changing the title after you pass away -- the answer is "NO". The Borrower in the Deed of Trust / Mortgage is the trust and the lender's documents will not have to be changed or amended at all because the named Borrower on the loan is not changing -- it was the trust before you passed and it will be the trust after you pass away. Your son can continue to make payments at the trustee of the Inter Vivos trust until the loan is paid off and the lender issues a release of the mortgage -- in favor of the original trust.

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Also, the Inter Vivos trust is for estate planning purposes for the benefit of your heirs named in your will and any other estate planning documents. There is no benefit to Chase from the Inter Vivos trust -- but the benefits to your estate and the ease of which your assets and property can be transferred upon your passing. You see, the Inter Vivos trust does not pass through probate court proceedings -- it can exist and continue to exist for the benefit of the beneficiaries of the trust without being mentioned in the will at all (your will, once filed with the probate court, becomes a public document that anyone can access and know the business of your estate and the inheritance amounts received by each of your heirs, etc). -

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Finally, regarding the “Certification and Rider to Promissory Note” and the “Inter Vivos Revocable Trust Rider” -- Unless you can describe to me what these documents say (in writing) or scan and attach copies to your next response, I am in the dark regarding what the contents/terms of the documents are and cannot give you a true answer on that question. I can guess and believe that the lender may be asking the beneficiaries of the trust to agree to the loan (as well as the trustee signature for the Trust (borrower), which is common and required by all lenders in such transactions every day. The rider to the note could be some type of personal guaranty of the note from an individual person and not the Inter Vivos Trust Borrower or it could say anything -- but until you at least fill me in regarding the contents of those documents, I cannot really tell you what the purpose

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Please let me know if you have further questions on this matter. If not, can you please press a positive rating above in the rating section so I will be paid for my time assisting you. I am paid nothing unless you press a positive rating before leaving the website (pressing the middle star or the fourth or fifth star on the right are positive ratings). Pressing a positive rating will not cost you any additional money -- it is simply the trigger to Just Answer to pay me for my time. THANK YOU VERY MUCH

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MARY