Loans to Trusts and Estates in Probate

Loans to Trusts and Estates in Probate2022-11-11T17:30:37+00:00

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 facilitated 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.

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 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

*This is for illustrative purposes only, HCS Equity does not provide legal advice or services

FAQ

If a property transfer has already been completed under Proposition 58, prior to Proposition 19, will the transfer be reassessed under the new law?2022-06-16T06:26:31+00:00

No, Legislature 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.

Under Proposition 19, if I inherit my parent’s family home and move into it as my principal residence, must I continue to live in the home to receive the parent-child exclusion? What happens if I move somewhere else?2022-06-16T06:59:18+00:00

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.

If a family home is gifted to two children, do both children have to live in the family home as their primary residence in order to receive the new parent-child exclusion under Proposition 19?2022-06-16T07:00:04+00:00

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.

Does Proposition 19 apply to a transfer of a rental home?2022-06-16T07:02:34+00:00

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.

If we didn’t submit our application for the parent/child exclusion before February 16, 2021, can we still qualify for the exclusion under Proposition 58/193?2022-06-16T07:03:10+00:00

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.

What are the Proposition 19 rules about the parent-child exclusion if the value of the family home is valued at greater than $1 million dollars?2022-06-16T07:04:44+00:00

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.

If a parent died prior to February 16, 2021, and the Assessor does not become aware of the death until a year later and reassesses the property as of the date of death, are the parent-child exclusion provisions applied under Proposition 58 or Proposition 19?2022-06-16T07:05:11+00:00

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.

I have my deed signed and notarized, and have submitted it for recording at my local County Recorder’s office prior to the February 15, 2021 deadline. What if my deed does not record by the February 15, 2021 deadline? Must my deed be recorded prior to that date in order to still be under the Proposition 58/193 provisions?2022-06-16T07:05:59+00:00

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.

How is a property held in a trust affected by Proposition 19?2022-06-16T07:06:43+00:00

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.

How do I apply for the homeowners’ exemption or disabled veterans’ exemption within one year of the transfer to qualify for the parent-child or grandparent-grandchild exclusion, as required by Proposition 19?2022-06-16T07:08:56+00:00

To apply for the homeowners’ exemption or disabled veterans’ exemption, a claim must be filed with the County Assessor.

I still have questions on Proposition 19. Who do I contact to discuss?2022-10-20T15:57:44+00:00

If you have further questions, you may call one of our experts at HCS Equity at 877-427-9820.

What is Proposition 19, and when did it go into effect?2022-10-19T17:38:37+00:00

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.

Are there any prepayment penalties on the loan?2022-10-19T17:51:59+00:00

No, the loan can repaid off anytime without any minimum interest amount due.

How long is the term?2022-10-19T17:51:44+00:00

The typical term is 1 year, but we can provide longer terms depending on the situation.

Does the trustee or administrator have to live in the property?2022-10-19T17:51:11+00:00

No, we can lend to a trust or estate regardless of occupancy of the property.

What type of properties can obtain a probate loan?2022-10-19T17:43:51+00:00

HCS will secure the loan against almost any type of real property located within CA.

Are there any loan amount limits?2022-10-19T17:49:59+00:00

We can lend from $30,000 to $3,000,000.

Does the trustee or administrator have to provide any personal financial information?2022-10-19T17:46:12+00:00

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.

Looking To Get Started?

Contact us today for more information regarding any of our loan products. As direct lenders, we make quick approval decisions, and can provide funding in as little as 7-10 days. We are available via phone or email anytime of the day or night.

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