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8 Trust Loan Questions - Answers for Beneficiaries and Trustees - Can an irrevocable trust get a loan?

Written by Posted On Wednesday, 15 July 2020 09:37
8 Trust Loan Questions - Answers for Beneficiaries and Trustees - Can an irrevocable trust get a loan? North Coast Financial, Inc.

Beneficiaries and successor trustees often have many questions regarding loans against an irrevocable trust. The following are some of the most common questions about trust loans.

Can an irrevocable trust get a loan?

An irrevocable trust can obtain a loan using real estate assets as collateral. The irrevocable trust loan would need to be approved by the successor trustee. The successor trustee will also need to review and sign various loan documents and disclosures. Lending to a trust can be for the benefit of the trust (pay obligations of the trust), successor trustee or for beneficiaries of the trust. The trust documents would have to allow for successor trustees and beneficiaries to obtain loans against assets owned by the trust.

READ MORE: Irrevocable Trust Loans - 3 Reasons Beneficiaries Borrow

Can a trust get a loan?

A trust can obtain a trust loan using trust-owned real estate assets as security for the loan. Trust loans are available for both living trusts (also known as revocable or family trusts) as well as irrevocable trusts (once the original trustees have passed). The trust documents would have to allow for successor trustees and beneficiaries to place loans against assets owned by the trust.

Can an irrevocable trust guarantee a loan?

An irrevocable trust cannot guarantee a loan but it can provide real estate assets as collateral for the loan. A borrower cannot technically guarantee their own debts. However, an individual can guararantee the debts of another borrower.

Can a trust give a loan to an individual?

If allowed by the trust documentation, a trust is able to provide a loan to an individual. The individual typically needs to be either the successor trustee or a beneficiary named in the trust.

Can a trustee or beneficiary borrow money from an irrevocable trust?

A successor trustee or beneficiary would be able to borrow money from an irrevocable trust as long encumbering the trust’s real estate assets is allowed by the trust documents.

How does a beneficiary get a loan from a trust?

For an irrevocable trust, the beneficiary will need approval from the successor trustee in order to obtain a trust loan. The beneficiary can contact a trust loan company to start the application process. In most cases, both the beneficiary and successor trustee will need to fill out application forms. The beneficiary will fill out an application based on their personal financials. The successor trustee will fill out an application on behalf of the trust with information specific to the trust as well as the real estate that will be used as collateral for the loan.

READ MORE: How to Refinance an Inherited Property to Buy Out Heirs

Can you use an irrevocable trust as collateral?

Real estate assets owned by a trust can be used as collateral as long as this is permitted by the trust documents.

Can a trust take out a home equity loan?

A trust is able to borrow against real estate assets owned by the trust. If the trust is currently a family/living/revocable trust the trustee should be able to obtain a loan from a conventional lender such as a bank or credit union. If the trust is an irrevocable trust the successor trustee will need to contact a irrevocable trust loan lender to obtain financing.

BONUS TRUST LOAN QUESTIONS

How do Prop 58 loans work for trusts?

Prop 58 loans allow the beneficiary to take out a loan against real estate assets within the trust while allowing for a parent to child transfer. The loan for Prop 58 provides the loan proceeds directly to the trust. The loan proceeds are then used to pay off the beneficiaries who are selling their interest in the real estate. The title of the property can then be transfered from the name of the trust into the name of the beneficiary who is keeping the property.

Can an irrevocable trust get a mortgage?

Irrevocable trust mortgage financing is available from specialized trust loan lenders. An irrevocable trust mortgage is intended to be short-term loan to assist the trustee or beneficiary with covering trust expenses or to buy out other siblings/beneficiaries. The real estate will need to be taken out the irrevocable trust and put into the name of an individual or a new living trust in order to obtain a long-term mortgage.

Can an a trust get a mortgage?

A living trust (also known as family trust or revocable trust) will be able to obtain a mortgage from a conventional lender such as a bank or credit union. Because the original trustee(s) who created the trust are still alive, they will be able to apply and sign for the mortgage against the property within the trust.

Do you have another question?

Do you have additional questions about trust loans in California? Please contact North Coast Financial for a free consultation. North Coast Financial also provides probate loan and estate loans.

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Jeff Hensel

North Coast Financial, Inc. is a California hard money lender with over 37 years of experience specializing in various types of hard money loans including probate and estate loans, investment and rental property loans, bridge loans, fix and flip/rehab loans, purchase loans, cash out and refinance loans and other hard money loans with California real estate as collateral.

https://www.northcoastfinancialinc.com/

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