Trust Loans in California

Trust Loans for Beneficiaries & Trustees – Irrevocable & Family Trust Loans

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    Trust Loans from North Coast Financial

    North Coast Financial is a California direct lender specializing in providing trust loans to beneficiaries and trustees. The trust must own California real estate to serve as collateral for the loan. Loans can be made to both revocable (family/living) and irrevocable trusts. A California trust loan specialist, North Coast Financial also provides probate and estate loans for inherited property that is not owned by a trust. Trust and probate loans are sometimes referred to as bridge loans due to the short-term nature of these mortgages.

    Our trust loan process allows beneficiaries to perform a trust beneficiary buyout and take advantage of Proposition 58 or Proposition 19. Prop 58 or Prop 19 can prevent a property tax reassessment on transfers from parents to children. Lending to a trust can be completed as quickly as 5-7 days.

    With more than 40 years of trust lending experience, North Coast Financial provides loans to trusts with fast approvals and funding, flexible lending criteria and competitive rates with no hidden fees. Contact North Coast Financial now and have your trust loan funded fast.

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    Why Choose North Coast Financial?

    Recently Funded Trust, Estate and Probate Loans by North Coast Financial

    Trust Loans California – California Trust Loan Specialist

    What is a Trust Loan? Can a Trust get a Mortgage?

    A trust loan is a type of inheritance loan typically only made by a specialized trust loan company or private money lenders. Lending money to a trust is generally not available from conventional lenders such as banks and credit unions since the borrower does not currently have their name on title of the real estate. North Coast Financial is able to make a trust loan directly to the trust.

    The trust document must allow for the beneficiary (or trustee) to borrow against real estate owned by the trust. Trusts commonly allow for the trustee to obtain a trust loan for the benefit of the trust or beneficiaries. The trustee or successor trustee is the individual with the authority to encumber and pledge real estate assets of the trust as security for the loan.

    READ MORE: Can a Trust get a Mortgage?

    Can a Beneficiary Borrow Money from a Trust?

    A beneficiary can borrow money from a trust as long as the trust documents allow for borrowing. The vast majority of trust documents do allow for borrowing against the trust’s assets. The beneficiary can borrow money from the trust and use the trust’s real estate assets as collateral for the loan. The trust loan must be approved and signed by the successor trustee of the trust, who may also be a beneficiary.

    Trust Loans to Beneficiaries

    Trust loans to beneficiaries involves making the loan directly to the trust and securing the loan against real estate owned by the trust. The successor trustee will need to approve of the trust loan and sign the loan documents and disclosures. Obtaining a trust loan when buying out a siblings share in an inherited house can be processed and funded in as few as 5-7 days. The monthly loan payments and ultimate refinance of the trust loan are the responsibility of the beneficiary buying the property from the trust.

    Trust loans are frequently used by beneficiaries (siblings, heirs) who wish to divide an interest in trust-owned real estate. Often one of the beneficiaries wants to maintain ownership of the real estate while other beneficiaries want cash in exchange for their interest in the property. Trust lending solves the problem by providing fast and flexible funding for a trust beneficiary buyout.

    Trust Beneficiary Buyout

    A trust beneficiary buyout can be completed quickly and easily with the help of a trust loan from a California trust loan specialist. The trust loan provides the trust with cash which is used to buy out beneficiaries who do not wish to maintain an interest in the property. Once the beneficiaries have received their funds, the title of the property can be transferred to the beneficiary who will own the property going forward. Now the property-owning beneficiary can obtain a traditional loan in order to refinance the trust loan.

    Buying out a trust beneficiary with a trust loan can have valuable property tax implications. The trust loan is considered a 3rd-party loan which allows for the beneficiary who is buying the property to apply for Proposition 58 in California and prevent a property tax reassessment (see additional information on Prop 58 below).

    Lending to an Irrevocable Trust

    Can an irrevocable trust get a loan? Yes, as long as the successor trustee(s) approves of the loan being placed against the real estate and is able to complete the loan process. The successor trustee will be required to review and sign various loan documents and disclosures related to the irrevocable trust loan. Lending to a living trust (revocable trust) would be handled by the current trustee.

    Lending to a trust typically takes 5-7 days to process and fund as long as there are no issues with title and trustee is able to review, sign and return the trust loan documents and disclosures in a timely manner.

    READ MORE: Irrevocable Trust Loans – 3 Reasons Beneficiaries Borrow

    READ MORE: Understanding Irrevocable Trust Loans

    Trust Loan Interest Rates

    Trust loan interest rates are commonly in the range of 9.75-10.95% for a 1st loan while rates for a 2nd loan against the trust-owned property are likely to be around 12%. Trust loan interest rates are higher than conventional interest rates as the trust loan is only a short-term lending solution. For most trust loan borrowers, the temporary higher interest rates are worth the added expense to give the trust the needed liquidity. As long as the trust distributes or sells the real estate in a reasonable amount of time, the higher trust loan interest rates don’t end up being a significant expense.

    Once the real estate is transferred from the name of the trust into the name of an individual, the property can be refinanced into a long-term conventional loan. If the plan is to sell the trust property, the sales process will automatically payoff the trust loan.

    Family Trust Loans – Lending Money to a Family Trust

    Family trust loans allow for a trustee to obtain a mortgage secured by real estate within a family trust. Borrowing money from a family trust allows the trustee (or successor trustee) or beneficiaries to raise cash in order to divide ownership in a property, assist a beneficiary or take care of other obligations of the trust.

    The family trust loan is made directly to the trust. Typically the trustee or one of the beneficiaries is made responsible for making the loan payments and ensuring the family trust mortgage is paid off.

    Loans for Proposition 58 & 193 – Avoid Property Tax Reassessment

    Lending money to a trust can also help a beneficiary utilize Proposition 58 in order to avoid a property tax reassessment. California’s Proposition 13 keeps property taxes at reasonable levels as property values appreciate over the years. Prop 58 allows for the exclusion of a property tax reassessment for parent to child transfers. This allows heirs to take advantage of a tax basis kept low by Prop 13. Loans for Prop 58 can save the beneficiary thousands of dollars each year in property taxes.

    Attorneys often advise clients to obtain a 3rd-party loan (Prop 58 loans) in order to buy out another beneficiary’s interest in real estate owned by a trust. Loans for Prop 58 are made directly to the trust. The beneficiaries who are accepting cash instead of real estate are paid directly from the trust’s bank account. Once the other beneficiaries are paid and no long have an interest in the real estate, title can be transferred from the parent’s trust directly to the child who will maintain ownership of the property.

    Proposition 193

    Similar to Prop 58 loans, Prop 193 excludes a property tax reassessment on the transfer of real estate from grandparents to grandchildren. The transfer is eligible for Prop 193 when the parents of the grandchildren are deceased as of the date of the real property transfer.

    Proposition 13

    Prop 13 limits property tax increases on any given property to no more than 2% as long as the property is not sold or transferred. This allows property owners to estimate the amount of future property taxes. Proposition 13 was passed in California on June 6th, 1978.

    *Consult an attorney or a tax professional to ensure the transfer is handled correctly in order to take advantage of Prop 58 or 193.

    Frequently Asked Questions on Proposition 58 from California State Board of Equalization

    North Coast Financial Trust Loan Program

    • Trust Loan Program

    Loan Application Approval Timeline Same day approval available
    Time to Fund Loan As few as 5-7 days
    Property Types Residential (Single family, multi-family), Commercial
    Loan Amounts $20,000 – $3 Million+
    Loan Terms 1-3 years
    Lien Position 1sts, 2nds
    Loan to Value (LTV) 1sts – Up to 70-75% of current value – 2nds – Up to 65% CLTV
    Fees No appraisal fees (in most situations) and no hidden fees
    Trust Loan Interest Rates and Points Please contact us for information on current rates and points

    Trust Loan Frequently Asked Questions:

    A trust loan is a loan against real estate assets within a trust, generally for the benefit of the trustee or trust beneficiaries. Trust loans are typically used to pay for expenses of the trust, complete a trust beneficiary buyout or take advantage of Prop 58.

    A trust is a separate legal entity which holds assets on behalf of beneficiaries. The trust specifies how the assets are passed to beneficiaries. Holding assets in a trust is popular as the assets do not have to go through the probate process upon the passing of the trustor.

    Probate is not required to change the title of the assets when the trustor of the trust dies. The probate process in California can take 12 to 18 months and require various fees and taxes to be paid.

    A trust can get a loan if the trust documents allow for borrowing against assets owned by the trust. Many trust loan lenders require the trust to own real estate which the trust loan can be secured against.

    North Coast Financial can enable a trustee to borrow against assets within an irrevocable trust. The trust must allow for borrowing against trust assets for the benefit of the trustee or beneficiaries of the trust. The trust must own California real estate to serve as collateral for the trust loan.

    A beneficiary can borrow from a trust as long as the trust documents allow for this. The trustee or successor trustee would need apply for the trust loan and sign the necessary loan documents and disclosures.

    An irrevocable trust can obtain a loan from North Coast Financial if the trust owns California real estate. The trust must allow for the successor trustee to obtain a loan against trust assets for the benefit of the trustee or beneficiaries. The loan will be made directly to the trust.

    An irrevocable trust can pledge real estate assets as collateral for a trust loan. The loan would be made directly to the irrevocable trust. A deed of trust would be recorded against the real estate similar to a traditional mortgage.

    A trust can give a loan to an individual by allowing them (trustee or beneficiary) to borrow against assets owned by the trust.

    A trust can be used as collateral if the trust owns assets (real estate) that can be encumbered. A trust loan lender can use trust-owned real estate as collateral for a loan by securing a note and deed of trust against the property.

    If the trust is a living, family or revocable trust the original trustee should be able to obtain a mortgage from a conventional lender such as a bank, credit union or other institution. The original trustee(s) are able to apply and sign for the mortgage secured by the property owned by the trust.

    If it is an irrevocable trust the successor trustee(s) will be able to obtain a short-term mortgage using the real estate as collateral. The real estate will need to be put into the name of an individual or into a new living trust in order to obtain a long-term mortgage against the trust property. Read more: Can a trust get a mortgage?

    A trust can loan money to a beneficiary if this is allowed by the trust documents. A trust loan lender can provide a loan to the trust with a note and deed of trust recorded against real estate owned by the trust. The trustee or successor trustee would need to apply for and sign the documents and disclosures to obtain the trust loan.

    Prop 58 and 193 Forms and Information

    A claim for reassessment exclusion for transfer between parent and child or from grandparent to grandchild must be filed with the county where the real estate is located. Additional information and forms are listed below.

    Jeffrey A. Hensel