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Ask Buachaill Your Own Question
Buachaill, Lawyer
Category: Republic of Ireland Law
Satisfied Customers: 10528
Experience:  Barrister 17 years experience
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I am enquiring if it possible to put a mortgaged property

Customer Question

I am enquiring if it possible to put a mortgaged property into an irrevocable trust here in Ireland. If so, and the property is rented can the rental income go into the trust also to be more tax efficient. Our principal residence is also mortgaged jointly with spouse, can it be placed in the trust also.
Submitted: 1 year ago.
Category: Republic of Ireland Law
Expert:  Buachaill replied 1 year ago.

1. There is no limitation upon a mortgaged property being placed into an irrevocable trust. However, the property still remains subject to the mortgage. Only now, it is the trust which owns the property. Similarly, there is no impediment to putting your principal residence into a trust, even if it is mortgaged jointly with your spouse. However, your spouse would have to join with you in transferring ownership of the house to the trust. Then neither of you would own the principal residence. The trust would own the principal residence but subject to the claim of the financial institution under the mortgage.

Customer: replied 1 year ago.
thank you. What is a private irrevocable trust? If a private irrevocable trust was what we decided as an option to do, who can view the contents of this trust?
Expert:  Buachaill replied 1 year ago.

2. A private irrevocable trust is a species to trust. It is private like over 99% of trusts. Private here is to be contrasted with a public trust which fulfills some form of public benefit such as a charity. Irrevocable means that the power is taken away from the trustees or the settlor to bring the trust to an end. The settlor is the person whose assets are conveyed into the trust. In your question, that would be yourself and your spouse. You in essence, could not undo the trust once you had conveyed away your assets to the trust. Nor could the people chosen as trustees reverse the trust. This is what irrevocable means. In essence a private irrevocable trust is one which fulfills a private aim and which cannot be revoked by the person who created it or by the people appointed as trustees. Finally, no one can view the contents of any form of private trust, whether an irrevocable private trust or an ordinary private trust.

Customer: replied 1 year ago.
Thank you again for the clarity of the different types of trusts.If there was another downturn in the economy and god forbid another global financial crash. would the properties which could have mortgages on them then be taken by the lenders if unable to pay the mortgages back and was in negative equity at the time.we would like to have some security if we ae lucky to see our retirement in the future.
Expert:  Buachaill replied 1 year ago.

3. As I stated in Answer (1) "the property still remains subject to the mortgage". Just because you place a property in a trust, this does not wash the property clean of the mortgage. So, you need to be aware that this transfer to the trust does not change the overall financial position in relation to the mortgages and the property. It merely gives the ownership to a different vehicle.

Customer: replied 1 year ago.
who would be liable for the payment of the mortgage once the trust was set up.I am a bit confused
Expert:  Buachaill replied 1 year ago.

4. If the trust owns the property, then the mortgage would be discharged from the monies coming to the trust. However, as the mortgage will have been taken out by you and your wife, you would still be liable to the bank for payment of the mortgage, unless you get the bank to accept repayment from the trust. Just because you transfer the property to a trust does not mean that the bank will release you from your obligation to repay the mortgage personally.