5 Steps For An Irrevocable Trust In California To Take Out A Loan Secured By Real Estate
In this blog, we’ll discuss the 5 steps involved in securing a loan against real property held in an irrevocable trust in California to equalize and distribute assets and preserve the parent-child exclusion from reassessment.
In California, it is possible for an irrevocable trust to obtain a loan using real estate as collateral. The purpose of such a loan could be to distribute assets among the beneficiaries in a fair and equal manner. Additionally, these loans comply with the BOE’s rules regarding the parent-child exclusion from reassessment , which is also known as Proposition 58 or Proposition 19.
Proposition 58 and Proposition 19 are laws that enable the transfer of a residence from a parent to their child without causing a reassessment of the property’s value for property tax purposes. This exclusion from reassessment differs depending on which proposition is applicable. Therefore, it is advisable to seek guidance from a professional to understand the specific conditions and requirements that apply to your case
Step 1: Review the Trust Agreement
The process of securing a loan against real property held in an irrevocable trust requires careful consideration and a series of well-defined steps. The first step involves reviewing the trust agreement. This is a crucial step that requires a thorough understanding of the provisions and clauses contained in the trust agreement.
The trust agreement is a legally binding document that establishes the terms and conditions of the trust. It outlines the responsibilities of the trustee, who is the person appointed to manage the trust and its assets, and the distribution of assets among the beneficiaries. It also sets out any restrictions on using trust assets as collateral for a loan, which is critical in determining the feasibility of securing a loan.
Step 2: Contact HCS Equity, a private lender specializing in third party loans to irrevocable trusts
When it comes to securing a loan for an irrevocable trust, it is important to work with a lender that specializes in this type of lending. HCS Equity is a private lender that stands out as the industry leader in providing loans to irrevocable trusts. Unlike traditional lenders such as banks, credit unions, and online lenders, HCS Equity offers loans specifically designed for the unique needs of irrevocable trusts.
Whether the trust needs funds for asset distribution or any other trust related purpose, HCS Equity can provide the capital required. Their lending process is streamlined, allowing for quick access to funds with limited underwriting.
Step 3: Equalize Assets Among Beneficiaries
One of the primary responsibilities of a trustee is to equalize assets among the beneficiaries of a trust. Equalizing assets means that each beneficiary must receive a fair and reasonable share of the trust assets. To ensure that assets are equalized properly, the trustee must have a thorough understanding of the trust agreement’s provisions and any limitations or restrictions on asset distribution.
Step 4: Distribute Assets to Beneficiaries
Once the trustee has equalized the trust assets among the beneficiaries, the next step is to distribute the assets. This requires careful planning and execution to ensure that each beneficiary receives their rightful share of the trust assets.
Before distributing the assets, the trustee typically provides each beneficiary with a detailed statement of their share of the trust assets. This statement should include information on any real property that has been taken as collateral for a loan, if applicable. The statement should be comprehensive and provide a clear breakdown of the beneficiary’s share of the trust assets, including any cash or property.
Once the beneficiaries have received their share of the trust assets, the trustee’s responsibilities do not necessarily end. In cases where real property has been taken as collateral for a loan, the trustee must ensure that the loan is repaid in full to prevent any potential legal or financial issues. This Will involve working closely with the lender and ensuring that the loan repayment schedule is adhered to.
Step 5: Transfer Property to Beneficiaries
The final step is to transfer the real property to the beneficiay/ries seeking to retain the family home. It is important to ensure that this transfer does not trigger a reassessment of the property’s value for property tax purposes by submitting all the necessary documentation to the county assessor’s office in a timely manner.
The parent-child exclusion from reassessment provides a way to transfer a residence from a parent (or their trust) to their child without causing a reassessment of the property’s value. However, it is essential to note that the exclusion from reassessment varies depending on which proposition applies, either Proposition 19 or Proposition 58, so please contact us or your attorney for guidance to ensure certain requirements are met.
HCS Equity Can Help
Securing a loan against real property in a trust in California to equalize and distribute assets and preserve the parent-child exclusion from reassessment can be a complex process, but it is possible with help from HCS Equity. The trustee must review the trust agreement, contact HCS Equity, review loan terms, equalize and distribute assets to beneficiaries, and transfer the property to the beneficiaries. Call HCS today