Deeding Your Home To An Asset Protection Trust: Due-On-Sale Clause Lies

Great simple article on protection of your home using an Asset Protection Trust by my associate Douglass Lodmell. Many of our clients have six and seven figures in home equity. We are routinely shocked at how many successful eductaed people who have detailed and expensive estate plans in place were simply told to put it in their revocable living trust where it is completely exposed.  Some states have great homestead laws that protect your home up to its full equity value, most do not. – Ike

Recently we’ve heard a lot of rumbling from clients about banks that are just plain uncooperative and unwilling to adhere to any measure of reason with respect to asset protection trusts.  Specifically, it seems that banks are succeeding at scaring people who want to refinance their homes.  The typical situation goes something like this:

A client holds her home in an asset protection trust and decides to refinance it.  The bank, however, has other plans.  The bank offers to refinance the home but only if the trust is amended to erode all of its asset protection features, rendering the trust totally useless.  But our clients are savvy, so they propose to remove the home from the asset protection trust and then refinance it.  Only one problem with that plan, as the bank usually proceeds to scare the bejesus out of the client by stating that if the home is ever deeded back to the trust, the due-on-sale clause will be triggered.  Effectively, that means that the bank can call the entire principal due on the loan.

It’s usually at this point that we get a call from the client asking for help, which is unfortunate since the bank is simply acting nonsensically.  Financing a home held in an asset protection trust does not impair the bank’s rights and security interest in the home at all!  It simply keeps your other creditors away from the home.  In short, the bank is massively wasting everyone’s time.

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