Sibling Buy-Outs on Trust Property
HCS Equity is a trust loan lender in the state of California specializing in sibling buy-outs of trust property.
HCS Equity has assisted hundreds of trustees and administrators with specialized financing to solve their short-term capital needs. Most commonly, a trust or estate in probate will borrow funds to facilitate the non pro-rata equalization and distribution of assets between beneficiaries under Proposition 19/58 (the parent-child exclusion from reassessment) in accordance with the State Board of Equalization’s guidelines. When executed correctly, this allows for the transfer of real property from a trust or estate in probate to a child without having the property taxes reassessed.
Obtaining a trust or estate loan at competitive rates and with a quick turnaround is possible with HCS Equity.
Contact us today to get started on your trust or estate loan.
Ensuring a Smooth Transfer of Assets from One Generation to the Next
We work closely with trustees/administrators and their attorneys to comply with State Board of Equalization tax regulations. We use our own capital as a private lender, provide swift review and approval, offer flexible underwriting and terms, and do not implement any prepayment penalties or minimum months of interest. Additionally, we provide availability of funds within 7-10 days in most cases.
In order to take advantage of property tax exclusions and avoid potential issues caused by cash-poor estates or beneficiaries’ needs, trustees and executors should consider HCS Equity a valuable resource in ensuring a smooth transfer of assets from one generation to the next.
In addition to matters relating to the parent-child exclusion from reassessment, HCS Equity also works with trustees and administrators (who have the appropriate legal authority) to provide funds needed for the following situations:
- Capital to cover existing debt service, property maintenance, paying property taxes and insurance
- Funds can be used to pay funeral expenses, lingering medical bills
- Funds to pay legal expenses during the lengthy trust administration or probate process
- To reimburse family members and administrators that have used their own capital as part of the administration process
- Pay legal and relocation expenses to evict tenants
- Rehab and update property prior to sale to maximize return to estate
Additional Benefits of Securing your Trust or Estate Loan
with HCS Equity, Include
- Competitive interest rates and terms
- No personal guarantee or down payment required
- Interest-only payments
- No prepay penalties
- No minimum months of interest
- Funds are typically available within 7-10 business days
Trust and Estate Loan Process
STEP 1: Determine who will retain property
Oftentimes one or more beneficiary wishes to retain the property and it’s tax base.
STEP 2 : Determine loan amount
The property value, other assets/cash in the trust or estate, and the number of beneficiaries are used to determine the liquidity needs for equalization.
STEP 3 : HCS Equity provides a loan
HCS Equity provides private capital directly to the trust or estate to create the liquidity needed for equalization, a necessary step to avoid reassessment under Proposition 19/58.
STEP 4 : Equalization and distribution
Cash and property are distributed as mutually agreed upon by the beneficiaries.
STEP 5 : Change of ownership
Change of ownership and exclusion from reassessment are filed.
STEP 6 : Private loan is repaid
The beneficiary retaining the property either repays the private loan with their own funds, or secures conventional financing to repay the private loan.
*This is for illustrative purposes only, HCS Equity does not provide legal advice or services
FAQ
No, Legislation is clear that Proposition 58 applies to transfers that occurred on or before February 15, 2021, and that Proposition 19 applies to transfers that have or will occur on or after February 16, 2021.
Our understanding is that at least one eligible transferee must plan to continually live in the property as his or her family home for the property to maintain the exclusion. Once the property is no longer your family home, it will receive a new taxable value. The new taxable value will be the assessed market value of the home on the date you inherited it and adjusted each year accordingly.
It appears that the current intent of the Legislature is to allow the exclusion as long as the parent’s family home becomes the family home of at least one of the children.
No, Proposition 19 limits the parent-child exclusion to a transfer of a family home that is the principal residence of the transferor and becomes the principal residence of the transferee.
As long as the date of transfer or change in ownership of real property between parent and child occurred on or before February 15, 2021, the transfer will qualify for the exclusion under Proposition 58/193. The date of death is the date of the change in ownership. The claim must be filed with the County Assessor within three years of the date of transfer or before a transfer to a third party or within six months of the date of notice of supplemental or escape assessment. Therefore, the claim does not need to be filed by February 16, 2021.
The value limit under Proposition 19 is the sum of the factored base year value plus $1 million. If the market value exceeds this limit, partial relief is available. The amount exceeding the excluded amount will be added to the factored base year value.
The law in effect is that the date of death will apply. Proposition 19 is clear that Proposition 58 applies to transfers that occur on or before February 15, 2021, and Proposition 19 applies to transfers that occur on or after February 16, 2021.
No. As long as the date of transfer is on or before February 15, 2021, the transfer will qualify for the Proposition 58/193 exclusion. Property Tax Rule 462.260 makes clear that the recordation date of a deed is rebuttably presumed to be the transfer date. This means that if evidence is shown that the transfer occurred prior to the recordation date, the assessor should accept that earlier date. Such evidence could be, for example, the date of a notarized document of transfer, such as a deed.
The administration of a trust is governed by the trust instrument itself. For properties held in trusts, Revenue and Taxation Code section 61(h) states that a change in ownership occurs when any interests in real property vest in persons other than the trustor or the trustor’s spouse or registered domestic partner when a revocable trust becomes irrevocable. This typically occurs upon the death of the trustor. The date of death is considered to be the date of change in ownership. Proposition 19 is clear that Proposition 58 applies to transfers that occur on or before February 15, 2021, and Proposition 19 applies to transfers that occur on or after February 16, 2021.
To apply for the homeowners’ exemption or disabled veterans’ exemption, a claim must be filed with the County Assessor.
If you have further questions, you may call one of our experts at HCS Equity at 877-427-9820.
Proposition 19, which went into effect February 16th of 2021, replaced Proposition 58, and created a far more narrow property tax exclusion for inherited properties. Contact us to learn more about Proposition 19 and whether it affects you.
No, the loan can be repaid anytime without any minimum interest amount due.
The typical term is one year, but we can provide longer terms depending on the situation.
No, we can lend to a trust or estate regardless of occupancy of the property.
HCS will secure the loan against almost any type of real property located within CA.
We can lend from $30,000 to $3,000,000.
No, we will not ask the administrator to provide their personal financial information, nor will we ask for their social security number, income, assets, etc. We provide the loan under the EIN or tax ID number of the trust or estate, and the trustee or administrator will only be signing in the capacity of trustee or administrator with no personal guarantee or liability.
