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.

What is Proposition 58?

What is Proposition 58?

What is Proposition 58?

California Proposition 58

In the State of California, real estate is typically reassessed at market value when it is sold or transferred. As a result, property taxes may increase dramatically due to the new higher assessment value. Prop 58 or Proposition 58 is a California Proposition that with limitations, grants the ability to avoid property reassessment on real estate inherited from a parent in California. With the passage of Proposition 58 in 1986, if the sale or transfer of real estate is between a parent and their child, under some circumstances, the property will not be reassessed if all Board of Equalization conditions are met and the application for exclusion is filed in a appropriate amount of time.

Proposition 58 allows the child who is inheriting the home to avoid property tax reassessment when acquiring property from their parents. The child’s taxes are instead calculated on the parents established Proposition 13 factored base year value, instead of the current market value when the property is acquired.

In some cases in order to qualify for California Proposition 58, when the home is being inherited via a trust or an estate and multiple child beneficiaries are involved, an equal distribution of assets must be made. That is where Commercial Loan Corporation comes in. Commercial Loan Corporation provides third party mortgages to trusts and estates with no personal guarantee required from the acquiring beneficiary or heir. Our trust loan or probate loan provides cash to the beneficiaries who are not inheriting the home and allows the child who is inheriting the home to keep the property and meet one of the key Proposition 58 qualification requirements.  On average we help our clients save over six thousand dollars a year in property taxes in addition to eliminating the need to sell the home. This speeds up the distribution process and saves on costly realtor fees.

If you or a client needs a distribution loan to take advantage of California Proposition 58, please call 877-464-1066. We can provide you with a free cost benefit analysis and let you know how much you may be able to save by taking advantage of your Prop 58 property tax benefits.

Apply Online for a Proposition 58 loan: Click Here

California Proposition 58 information found at californiaproposition58.org

Avoid Property Tax Reassessment On An Inherited Home

Avoid Property Tax Reassessment With California Proposition 58

Avoid Property Tax Reassessment On A Home Your Inherit From Your Parents

How to avoid property tax reassessment on a home you inherit from your mother or father in California

One of the biggest mistakes that most Californians make when inheriting real estate from a parent is not taking advantage of California Prop 58. In fact even some Estate Planners, Attorneys and Fiduciaries do not fully understand the full benefits and how to navigate Proposition 58. California Proposition 58 provides Californians with the ability to avoid property reassessment when inheriting a home from a parent.

Why is Proposition 58 and the ability to avoid property tax reassessment so important?

Avoiding property reassessment means you assume the existing property tax valuation that your parent had. With how rapidly property values have appreciated in California over the last 50 years, avoiding reassessment can mean an enormous tax savings. For instance, lets say that your parents purchased their home in 1980 for $180,000. Because of California Proposition 13, the county can not reassess a home more than 2% per year while held by the same owner. For this example we will estimate the county has the home you are inheriting assessed at $250,000. If the County property tax rate is 1.2%, that means the yearly property taxes on the home are just $3,000.

If you inherit the property from your parents, and you or your legal representation do not submit a request for an exclusion from reassessment and the home is currently valued at $1,250,000, your annual property taxes will jump to $15,000! That is a difference of $13,000 per year in property taxes that you could potentially be avoided. To compound the issue, property assessment values can be reassessed upwards by 2% annually. So the following year if that occurs, your property taxes will increase by another $300 as opposed to just $60 if you had received your exclusion from reassessment. Over 10 years that can really add up.

How can Commercial Loan Corporation help with Proposition 58 and an exclusion from Property Tax Reassessment?

California Proposition 58  has eligibility requirements. A process needs to be done correctly and proper documentation needs to be filed in order to receive and exclusion from property reassessment on a parent to child transfer of real estate. One of the stipulations is that when a parents home is held in a trust, an equal distribution of the trust assets must be made to qualify for Proposition 58. An important side note is that the beneficiary receiving the property can not use their own funds to create an equal distribution. If this is done, the assessors office views it as a property transfer between beneficiaries as opposed to a parent to child transfer, making it ineligible for a Proposition 58 exclusion from reassessment. Instead, the California Board of Equalization requires that a third party loan be used to provide the trust with sufficient cash for an equal distribution to be made. This information can be found on the California Board of Equalizations website at the following link that addresses questions and answers regarding California Proposition 58.

California Board of Equalization Website Information on Prop 58: BOE website document link

“When a trustee or estate administrator has the power to distribute trust assets on a pro rata or non-pro rata basis, the distribution of real property to one child  qualifies for the parent-child exclusion if the value of the property does not exceed that child’s interest in the total trust estate. A trustee who elects to make a non-pro rata distribution may equalize the value of the other beneficiaries’ interests in the trust assets by encumbering the real property with a loan and distributing the loan proceeds to the other beneficiaries. However, a loan cannot be made by any of the beneficiaries of the real property to the trust in order to equalize the trust interests. Such loan would be considered payment for the other beneficiaries’ interests in the real property resulting in a transfer between beneficiaries rather than a transfer from parent to child, which would disqualify the transfer from the parent-child exclusion.”

Commercial Loan Corporation is one of the only lenders in California that provides loans to trusts with out the requirement of a personal guarantee. This unique mortgage product allows an illiquid trust to become liquid and for the inheriting beneficiary to qualify for the benefits of Proposition 58 by meeting the parent to child transfer requirement. Unlike other lenders, we specialize in Proposition 58 loans. Our trust loan enables a beneficiary to encumber the inherited home and infuse the trust with the cash needed so that an equal distribution can be made and they can qualify for the parent-child exclusion and avoid a property tax reassessment with Proposition 58.

Call Us Today For Assistance

If you have any questions on the process of obtaining a loan for a property held in an irrevocable trust, please call us at 877-464-1066. One of our Proposition 58 loan specialists can answer any questions you may have. We can also provide you with a no cost trust loan benefit proposal. The proposal will show you how much you could save by optimizing your trust distribution. On average we save our clients over $6,000 per year in property taxes and $40,000 in additional distributions to beneficiaries. Let us help you avoid property tax reassessment!

Call 877-464-1066 or Click Here to request additional information.

Free Continuing Legal Education for Attorneys & Fiduciaries

Free Online Continuing Legal Education

Free Online Continuing Legal Education

Free Continuing Legal Education Online

Commercial Loan Corporation has partnered with Michael Wyatt to provide continuing legal education to Attorneys and Fiduciaries. Michael Wyatt is a California Property Tax Consultant with over 20 years of experience working in a California Tax Assessors Office. Commercial Loan Corporation is a California Lender that specializes in lending to Trusts and Estates. We are the leading provider of Mortgages to Real Estate held in a Trust to help clients retain a parents low property tax rate on an inherited home.

We are a licensed provider of continuing legal education for the state of California. Our course covers the pitfalls in change of ownership as well as third party loans to trusts and estates to facilitate an equal distribution and transfer of property tax base from a parent to child via an exclusion from property value reassessment. Even better, the course can be performed online and scheduled at a convenient time of your choice during the business hours of Mon-Fri 9am-4pm.

Presentation Name: A Jet Tour through the Mine Fields and Pitfalls of Change of Ownership for Trusts, Legal Entities, Estates and Probates
Credits:1 Hour MCLE

Please contact Tanis Alonso at 714-442-8995 or via email at talonso@cloanc.com and get signed up today!

We Maximize Trust & Estate Distributions Saving Clients An Average of $42,000.

We Maximize Trust Distributions

We Maximize Trust & Estate Distributions, Saving Clients Thousands of Dollars.

Maximize the Distribution of a Trust or Estate!

At Commercial Loan Corporation we specialize in maximizing trust distributions and providing innovative finance options for real estate held in a trust. On average we save our clients $42,000 when it comes time to distribute a trust. Depending on the worth of the trust and real estate involved that number can be significantly higher.

Maximizing trust distributions is not all we do.

  • We also help clients preserve a parents low property tax base on an inherited property. On average retaining a parents low property tax base saves our clients over $6,200 a year in property tax payments.We are one of just a few California lenders that offers third party financing to a trust; allowing a client to take advantage of Proposition 58 and keep a parents low Proposition 13 protect property tax rate.
  • We also have specialty loan programs that enable our clients to tap into the equity in their real estate with no tax consequences.
  • We even have programs that allow you to access the equity in a home to create a “nest egg” available in case of emergency.

We offer free consultations and one of our trust & estate specialists can help you determine which options are right for you and how much you may be able to save.

Call us today at 877-464-1066!

 

Orange County Bar Association Trust & Estate 2018 Holiday Social

Orange County Bar Association Trust & Estate 2018 Holiday Social

Please Join Commercial Loan Corporation at the Orange County Bar Association Trust & Estate 2018 Holiday Social

Orange County 2018 Holiday Social

Please join Commercial Loan Corporation at the 2018 Orange County Bar Trust & Estate Holiday Social. The event is being held on December 6th, 2018 at the Ocean Institute in Dana Point. Both Mike Riggs and Tanis Alonso will be attending the event from the Commercial Loan Corporation Trust & Estate Lending Department.  They can answer any questions that you may have on our loans to trusts and estates. We are experts on 3rd party financing to trusts and estates to help our clients preserve a parents property tax base on an inherited home.

Third Party Trusts & Estate Loans To Keep A Parents Property Tax Base On An Inherited Home.

If you will not be able to attend the Trust & Estate Holiday Social, but would like more information on our trust loans, estate loans or a loan to a home in probate; please call us at 877-464-1066. We can give you a free estimate on how much you might be able to save by preserving the property tax base on an inherited home. We assist both clients and attorneys with matters regarding California Proposition 58. For additional information on our trust loan programs or to apply for a trust or estate loan online, please visit this trust and estate loan page on our website.

You can register for the Orange County 2018 Holiday Social Here:
Register online at www.ocbar.org

Lending To A Home In A Trust – USC Trust And Estate Conference

USC Trust And Estate Conference

USC Trust And Estate Conference

Lending To A Home In A Trust In California

Please visit our table at the USC Gould School of Law 44th Annual Trust & Estate Conference on 11/16/2018. Mike Riggs & Tanis Alonso will be available to answer all of your questions on lending to a property held in a trust and how to preserve a property tax base on an inherited property in California. We will be hosting a table at the event from 7:AM to 3:PM and look forward to seeing your there. Exhibit hours are from 7:00 a.m. to 3:00 p.m. in the California Ballroom Foyer. The Ballroom Foyer is located on the 2nd floor. Exhibit tables are located in close proximity to the general sessions.

Loans To Trusts & Estate Properties

If you will not be able to attend the event, but have questions on loans to trusts and properties in a probate estate, please call us at 877-464-1066. We can assist you in understanding how you or a client can benefit from California Proposition 58 by transferring a parents low property tax rate to a child inheriting a home. Commercial Loan Corporation specializes in providing loans to property held in a trusts, including irrevocable trusts so that this can be accomplished. Our trust loans are Prop 58 compliant and allow for an equal distribution of the trust to be made using third party funds.

Click here for a link to use USC Gould School of Law Trust & Estate Flyer for details on how to attending and visit our booth on Loans to Trusts in California.

Loans To Trusts – Trust and Estate Conference.pdf

Trust & Estate Loan Benefit Calculator

Trust & Estate Loan Benefit Calculator

When you are considering keeping an inherited home from a parent and need to borrow money to buyout siblings or beneficiaries, it is important to make sure that it makes financial sense to do so. To assist you in doing so, we created the Commercial Loan Corporation Trust & Estate Loan Benefit Calculator.

Our trust and estate loan benefit calculator will help you quickly and easily determine if it makes sense to apply for a Proposition 58 exclusion from reassessment and take out a trust or estate loan. The loan benefit calculator compares your property tax savings to your estimated loan expenses and determines approximately how long it will take to recover those costs.  If you plan on keeping the home longer than it will take to recoup the fees, then the loan is of benefit; if not then it would make more sense to not conduct the loan.

So watch this short video on our Trust & Estate loan benefit calculator and then try the calculator yourself at https://cloanc.com/nprd-calculator/

For any additional assistance or to begin the Trust or Estate loan process, please call us at 877-464-1066.

Loans to Trusts

Loan to a Trust

Loan to a Trust

Loans to Trusts

At Commercial Loan Corporation, we specialize in providing financing to Trusts. Our loan provides the cash needed for an irrevocable trust or estate to make an even distribution when one of the beneficiaries is inheriting a home as their share of the distribution. The California Board of Equalization requires that an even distribution be made to take advantage of Proposition 58’s Parent to Child Transfer and avoid a reassessment of property taxes. Exclusion for reassessment of property taxes allows a child to keep their parents’ low property tax payment. Our loan helps clients save on average over $6,000 per year in property taxes. In just a few short minutes we can help a client determine how much they could save by taking advantage of California’s Proposition 58’s Exclusion for Reassessment of Property Taxes.

Call Today For A Free Consultation: 877-464-1066

 

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