Alexandria, VA Estate Planning Blog

Wednesday, March 7, 2012

Funding Mortgage Notes into Trusts

Mortgage note beneficiaries should strongly consider creating a revocable living trust and funding that note into the trust for estate planning purposes. However, no action should be taken without proper legal counsel.

Definition: A mortgage note is a written promise of one party to pay money to another party (Black's Law Dictionary)

Probate Problems

If a decedent's probate property includes a note than that person’s estate may receive numerous payments spanning multiple years. The decedent's personal representative (e.g. executor or administrator) may face numerous difficulties and increased exposure to liability because of the potential probate issues. The estate administration process may likely be significantly delayed (potentially for the life of the note or longer). Consequently, the estate administration expenses, costs and delays can be very substantial.


As beneficiary of the mortgage note, the beneficiary may be able to assign that note into their revocable living trust. By funding the note into a trust, the above referenced probate issues may be avoided. Notwithstanding, the trust should have provisions instructing the Trustee as it relates to extending the note and foreclosure. Before funding any note into a trust, the beneficiary should ensure that the assignment is allowable and prudent.

CAUTION: When funding mortgage notes, it’s critical to consult an attorney with regard to the tax and enforcement provisions of the note

Multi-Jurisdictional Issues

Determining what law applies can be complicated. The relevant law includes the jurisdictional law governing the enforcement and construction of the note, the jurisdictional law governing whether the transfer was completed and the jurisdictional law governing the administrative provisions of the trust beneficiary. There is a variety of rules that apply when determining jurisdiction and multiple states may claim jurisdiction.

If you have questions, feel welcome to contact our firm. We strongly advise you consult an attorney before taking any action.

The Lenzi Law Firm, PLLC assists clients throughout Northern Virginia and Washington D.C. including Fort Washington, Falls Church, Ft. Myer, Vienna, Rosslyn, Springfield, Mount Vernon, Annandale, Fort Belvoir, Fairfax, Dunn Loring, Merrifield, McLean, Oakton, Reston, Burke, Great Falls, Fredericksburg, Stafford and Herndon in Arlington County, Alexandria County, & Fairfax County.

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