Trust and Estates Terms and Definitions

Common Trust and Estate Terms

Common Trust and Estate Terms

Matters pertaining to Trusts and Estates can be complicated, especially if you are unfamiliar with the terminology. The following is a glossary of terms that are commonly used in Trusts and Estates and loans made to trusts.

Administration:
Trust administration refers to the trustees management of trust property according to the terms of the trust after the settlor’s passing.

Beneficiary:
A beneficiary is the person who derives advantage or benefits from something. There can be multiple beneficiaries in a trust. Beneficiaries are names in a trust or will to receive something.

California Proposition 13:
Prop 13 is a California Constitutional amendment enacted in 1978. California Proposition 13 limits the tax rate increase that can be charged annually on real estate. The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. Prop 13 also prohibited reassessment of a new real estate property tax base year value except for in cases of either change in ownership, or completion of new construction. 

California Proposition 58:
Prop 58 became effective in November of 1986.  With certain limitations, California Proposition 58 allows for the exclusion for reassessment of property taxes on transfers between parents and children. Prop 58 is codified by section 63.1 of the Revenue and Taxation Code. In the State of California, real estate or real property is reassessed at market value if it is sold or transferred. Property taxes can sometimes increase dramatically as a result. If the sale or transfer is between a parent and their child, under limited circumstances, the property will not be reassessed if certain conditions are met and the proper application is filed in a appropriate amount of time. Prop 58 allows a child inheriting a home to avoid property tax reassessment when acquiring property from a parent.

California Proposition 193:
Effective March of 1996, California Prop 193 is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren. Prop 193 requires that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. Prop 193 is also codified by section 63.1 of the Revenue and Taxation Code.

Change in Ownership:
Ownership of real property transferred from one person or entity to another.

Conventional Lender:
A conventional lender is a lender that provides loans that meet the lending criteria of the Federal National Mortgage Association (FNMA “Fannie Mae”) or Federal Home Loan Mortgage Corporation (FHLMC “Freddie Mac”). When it comes to lending to a property held in a trust, a conventional lender will not provide a loan to a trust.  They require that the property first be removed from the trust and placed in the name of an eligible borrower. Commercial Loan Corporation is one of the only California lenders that will lend directly to a trust.

Co-Tenants:
Co-Tenants or tenants in common share a specified proportion of ownership rights of real property.

Disproportional Distribution:
A disproportional distribution is a trust or estate distribution where one or more heirs or beneficiaries receives a larger portion of the distribution of an estate / trust.

Encumber:
To create a claim, limitation on, or liability against real property.

Equal Distribution:
An equal distribution is a trust or estate distribution where all heirs or beneficiaries receive an equal portion of assets in the trust or estate.

Equity:
The difference between the value of real property and anything owed against the real property.

Estate:
All the assets owned by a particular person (less debt) at death.

Executor:
A person or institution appointed by a testator to carry out the terms of their will.

First Right of Refusal:
A contractual right that gives its holder the option to buy real property.

Guarantor:
One that guarantees the repayment of a loan.

Irrevocable Trust:
Type of trust where its terms cannot be modified, amended or terminated without the permission of the grantor’s named beneficiary(ies).

Letter to Assessors:
Board of Equalization’s summaries of court rulings, legal opinions, highlights of enacted legislation, Property Tax Rules and technical bulletins for assessment problems.

Non-Pro Rata:
Each heir / beneficiary receives an equal portion of the entire estate / trust, but not necessarily of each asset.

Option to Purchase:
Opportunity to purchase a piece of real property.

Per Stirpes:
An estate / trust is distributed “per stirpes” if each heir / beneficiary is to receive an equal share of the estate / trust.

Pro Rata:
Each heir / beneficiary receives an equal portion of each asset in an estate / trust.

Probate:
The official proving of a will.

Promissory Note:
A signed document containing a written promise by one party to repay a stated sum to another party.

Proportional Interest:
The interest of one heir / beneficiary divided by the total number of heirs / beneficiaries.

Revocable Trust:
Type of trust where its terms can be modified, amended or terminated dependent on the grantor.

Security Interest:
Enforceable legal claim or lien on real property.

Settlor:
The settlor is the entity that established the trust.  The settlor goes by several other names in matters related to trusts; you may also see them described as the grantor, or trustor. The settlor’s role is to legally transfer control of an asset to a trustee. The trustee then manages it for one or more beneficiaries.

Share / Share Alike:
Each heir / beneficiary receives an equal portion of the estate / trust.

Statutory Powers:
Legal powers given by a statute.

Testator:
The person who made a will.

Trust:
An arrangement whereby a person or entity (trustee) holds assets as its nominal owner for the good of one or more beneficiaries.

Trust Distribution Worksheet:
The final accounting of the assets & liabilities for the distribution of a trust.

Trust Residue:
All of the property that is left after specific gifts are distributed from a trust.

Trustee:
An individual or entity given control or powers of administration of assets in a trust.

Trustor:
The person(s) that created a trust (aka “settlor” or “grantor”).

If you have any questions, please call us at 877-464-1066 and we will do our best to assist you.

California Proposition 13 – People’s Initiative to Limit Property Taxation

California Proposition 13 Property Tax Information

About California Proposition 13 Property Tax Information

About Proposition 13

California Proposition 13, also known as the People’s Initiative to Limit Property Taxation was an amendment of the Constitution of California enacted in 1978. California Proposition 13 made it so that the maximum amount of any tax on real estate shall not exceed one percent of the full cash value of such property and additionally restricted annual increases of assessed value of real estate to an inflation factor, not to exceed 2% per year.

Proposition 13 also prohibited reassessment of a new base year value except in cases of change in ownership, or completion of new construction. Later, in 1986 Californian’s passed Proposition 58 which also excludes from reassessment transfers of real property between parents and children, with certain limitations.

Commercial Loan Corporation specializes in helping clients who inherit properties qualify for Proposition 58 and avoid property tax reassessment when a third party loan is needed to equalize the distribution of a trust or estate. This allows you to keep a parents low Prop 13 tax base and save potentially thousands of dollars a year in property taxes. In fact, our average client saves over $6,000 a year in property taxes.

If you are inheriting home from a parent and are interested in keeping their Proposition 13 tax base, please call us at 877-464-1066.

Trust and Estate Terminology

Trust and Estate Terms

Trust and Estate Terms

Terms for Trusts & Estates

Dealing with Trusts and Estates can be a complicated matter. It can go from complex to incomprehensible if you do not understand the terminology. To help you better understand, we have compiled a list of some of the most common terms used in trust and estate matters to assist you. If you need any additional clarification, we are here to assist you.  Please call us at 877-464-1066 for any needs you may have.

Common Terms For Trusts And Estates

Appointer  – The appointer is the person who can appoint a new trustee or remove an existing one.

Appointment – The act of appointing, giving an asset from the trust to a beneficiary; or the name of the document which gives effect to the appointment. The trustee’s right to do this, where it exists, is called a power of appointment. Sometimes, a power of appointment is given to someone other than the trustee, such as the settlor, the protector, or a beneficiary.

Beneficiary – A beneficiary is anyone who receives benefits from any assets held by the trust.

Bridge Loan – A bridge loan is short term financing that is typically paid back or refinanced. Often times the term on a bridge loan can range from 3 to 12 months.

Estate Planning – The process of arranging ones property and affairs to insure their disbursement in the most effective way possible.

Power of Attorney – A power of attorney is a legal instrument that empowers another person as agent to deal with one’s property and affairs.

Executor – The one nominated in a Will and or appointed by Probate Court to manage and distribute a decedent’s estate in accordance with the terms of the Will.

Fiduciary – A fiduciary is a person to whom property or power is entrusted for the benefit of another.

Proposition 13 – California Proposition 13 is a constitutional amendment enacted in 1978. The Proposition 13 Amendment limits the tax rate increase that can be charged annually on real estate in California. The proposition restricts the annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. California Proposition 13 also prohibits reassessment of a new real estate property tax base year value except for in cases of either change in ownership, or completion of new construction.

Proposition 58 – California Proposition 58 allows for the exclusion for reassessment of property taxes on transfers between parents and children. If the sale or transfer of real property is between a parent and their child, under limited circumstances, the property will not be reassessed if certain conditions are met and the proper application is filed in a appropriate amount of time. Proposition 58 allows the new property owner to avoid property tax increases when acquiring property from their parents. The new owner’s taxes are instead calculated on the established Proposition 13 factored base year value, instead of the current market value when the property is acquired from the parent.

Protector – A protector may be appointed in an express, inter vivos trust, as a person who has some control over the trustee usually including a power to dismiss the trustee and appoint another.

Settlor – This is the person or persons who creates the trust. They may also be known as a Grantor.

Trust – A trust is an arrangement in which ownership of assets is transferred to a Trustee, who thereafter has a fiduciary duty to distribute the trusts assets to the beneficiaries of the Trust.

Trust Deed – A trust deed is a legal document that defines the trust such as the trustee, beneficiaries, settlor and appointer, and the terms and conditions of the agreement.

Trust Distributions – A trust distribution is any income or asset that is given out to the beneficiaries of the trust.

Trustee – A person, corporation who administers a trust. A trustee is considered a fiduciary and owes the highest duty under the law to protect trust assets from unreasonable loss for the trust’s beneficiaries.

If you require a third party bridge loan to take advantage of the benefits of proposition 58, please call us at 877-464-1066 so that we may assist you.

Information and terms for trusts and estates found at: trustandestate.loans