Refinance an estate locked in Irrevocable Trust
My wife and I put, practically, all our our 401k in our retirement home two years ago and placed the estate in trust. Irrevocable. At the suggestion of our estate planner/attorney.
We have a 30yr fixed loan with 200k remaining at 3.5 and fair market value in excess of 350k.
Question: why are we possibly facing higher than current interest rates just because we have the estate in ir-trust?
We’d like to keep our monthly payment close to what we pay today and drop to a 20 year loan. Also would like to draw on some of the equity. Some banks ie; 53rd have refused us.
Not sure why. They stated it was because of the irrevocable status.
Can you help us understand this.
Thanks Terry
Feel free to share our dilemma
Terry Says
First of all, I’m willing to bet that you placed your home in a REVOCABLE LIVING TRUST! Not an IRREVOCABLE trust. In fact, I’ll help you sue the lawyer who did it if this was an irrevocable trust!
And probably the estate planner helped you re-title the house in the name of the RLT. But YOU (and probably you and your wife) are the TRUSTEES of that RLT. And you can refinance at any time. You are likely to find it difficult if not impossible to refinance if you are retired and no longer have income from work.
So if you want to pay down that loan on a 20 year schedule, you can always add an extra amount — the same amount every month — to your monthly payment. Specify that it is to go toward the PRINCIPAL of the loan balance.
BUT WHY WOULD YOU DO THAT? If you placed all your retirement funds into this house (and paid the taxes at that point), surely you need to keep some liquidity on the side for emergencies. The only one who will benefit from you putting more equity in your house is your heirs!
I think you really need a session with a fee-only FIDUCIARY financial planner to review — and explain — your situation. Find one you can trust at www.Wealthramp.com. And please write back and let me know that your home is indeed in a Revocable Living Trust. Ignorance is dangerous.
