Transferring Texas Real Estate and Mineral Rights into a Living Trust: Step-by-Step

A living trust is essentially a legal bucket. Creating the bucket is only the first step; to actually protect your family from the delays and expenses of probate court, you must put your assets into the bucket. In Texas, the most valuable assets families own are typically real estate, ranging from suburban homes to working ranches, as well as highly lucrative oil and gas mineral rights. The process of legally moving these physical assets into your trust is called 'funding.'

Funding real estate is a highly technical process. If you sign the wrong type of deed, you could accidentally void your title insurance, trigger a mortgage acceleration, or lose vital state property tax exemptions. To ensure your real property is transferred legally and securely, you should hire an attorney. Browse our US Lawyers Directory to find a local Texas real estate and estate planning lawyer who can manage these critical transfers.

Step-by-Step Guide to Funding Real Estate in Texas

Whether you own a house in Houston, a ranch near Fort Worth, or mineral interests in the Permian Basin, the transfer process involves drafting specific conveyance instruments under Tex. Prop. Code § 5.021 and Tex. Prop. Code § 5.022, as well as establishing trust property under Tex. Prop. Code § 112.001(1).

Step 1: Drafting the Correct Deed

You cannot simply list your home on a piece of paper inside the trust binder. You must execute a new deed transferring ownership from you as an individual to you as the Trustee of your trust. Generally, attorneys use a Form Special Warranty Deed, Texas, State Bar of Texas, Special Warranty Deed or a General Warranty Deed. It is crucial not to use a simple 'Quitclaim Deed' in Texas, as case law like Porter v. Wilson, 389 S.W.2d 650 (TX Supreme Court 1965) and recording rules under Tex. Prop. Code § 13.006 highlight that quitclaim deeds merely convey dubious interests without warranting title, which can severely compromise your chain of title and void your existing title insurance policy.

Step 2: Maintaining the Texas Homestead Exemption

Texans enjoy massive property tax savings through the Residence Homestead Exemption under Tex. Tax Code § 11.13. Many homeowners fear that transferring their house into a trust will cause them to lose this tax break. Fortunately, Texas law allows you to keep your homestead exemption, provided the trust includes specific qualifying language (often referred to as a 'Qualifying Trust' provision). Once the deed is recorded, you must notify the local appraisal district-such as the Harris Central Appraisal District, Houston or the Tarrant Appraisal District, Fort Worth-by submitting a Form 50-114, Texas, Comptroller of Public Accounts, Residence Homestead Exemption Application to confirm the property is still your primary residence.

Step 3: Transferring Oil, Gas, and Mineral Rights

Mineral rights in Texas are treated as real property. If you own royalty interests, you must execute a 'Mineral Deed' or an 'Assignment of Royalty Interest' transferring those specific rights into your trust. This deed must be filed in the specific county where the minerals are physically located, not necessarily the county where you live. After recording the deed, you must send a copy to the oil and gas operating company paying your royalties so they can update their payment division orders to issue future royalty checks in the name of your trust.

Step 4: The Due-on-Sale Clause (Mortgages)

Most mortgages contain a 'due-on-sale' clause, meaning if you transfer the property, the bank can demand the entire loan be paid off immediately. However, federal law protects homeowners. Under the Garn-St. Germain Depository Institutions Act of 1982, 12 U.S.C. § 1701j-3(d)(8), a lender cannot trigger the due-on-sale clause when you transfer a residential property containing less than five dwelling units into a revocable living trust where you remain the beneficiary. You generally do not need the bank's permission, but you should notify your mortgage servicer and update your homeowner's insurance policy to list the trust as an additional insured party.

How Much Does it Cost to Transfer Real Estate?

Funding your trust with real estate involves legal drafting fees and government recording costs.

How Long Does the Transfer Process Take?

Drafting the deed is relatively fast and usually takes your attorney a few days. Once you sign the deed before a Notary Public, it must be mailed or electronically filed with the specific County Clerk's office where the property is located. For example, filing with the Bexar County Clerk, San Antonio usually results in the deed being officially recorded within 1 to 3 weeks. For mineral rights, updating the division orders with the oil company can take an additional 30 to 60 days to process.

Frequently Asked Questions (FAQ)