Irrevocable Trust Loans

Lending to an Irrevocable Trust

Lending to an Irrevocable Trust

Commercial Loan Corporation is one of only a few California lenders that will lend directly to an irrevocable trust. So what is an irrevocable trust?

An irrevocable trust is a type of trust where its terms cannot be modified, amended or terminated under most conditions. Often times, an irrevocable trust will begin as a living trust and once the grantor passes, will turn into an irrevocable trust. An irrevocable trust designates a trustee and beneficiary(s). The trustee is the person who manages the trust and may also be one of the beneficiaries. An irrevocable trust is commonly used to pass assets to heirs while avoiding probate. When you transfer your assets into an irrevocable trust, you relinquish control of those assets. The trust becomes the owner of the assets at that point.

The reason why most lenders will not lend directly to an irrevocable trust is because the trust is the owner of the assets, as opposed to an individual. This become important when a child is inheriting a home from a parent and would like to use Prop 58, or Prop 19 to keep a parents low property tax base. The California Board of Equalization requires and equal distribution of assets be made when multiple beneficiaries are involved unless specific conditions are met. If there are not sufficient cash assets in the trust to make an equal distribution, then a loan against real estate in the trust will be needed to qualify for the parent to child transfer to avoid property tax reassessment.

That is where Commercial Loan Corporation comes into play. We specialize in lending to trusts and estates; specifically irrevocable trusts.  Our trust loans, allow one child to keep an inherited home with the parents low Prop 13 tax base in tact, while the other child beneficiaries receive an equal portion of cash. Everybody wins! By avoiding expensive realtor fees, each beneficiary on average receives and additional $15,000 in inheritance and the child keeping the family home saves on average $6,200 per year in property taxes.

If you, a family member or a client may be able to benefit from a trust loan, we are here to assist you and answer any questions you might have.  Please call us at 877-464-1066.

California Proposition 19

California Proposition 19

California Proposition 19

On November 3, 2020, California voters approved Proposition 19, the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. Proposition 19 is a California constitutional amendment that limits people who inherit family properties from keeping the low property tax base unless they use the home as their primary residence.

This new proposition will make important changes to existing statewide property tax saving programs for Californians. California Proposition 19 replaces California Proposition 58(1986) and Proposition 193(1996) by limiting parent-and-child transfer and grandparent-to-grandchild transfer exclusions. These Prop 19 changes are likely to go into effect on 2/16/2021. As of right now, the California Board of Equalization is still trying to work out some of the formalities of the new legislation. You can view the Board of Equalization current interpretation of California Proposition 19 here.

Here are the impacts made to Proposition 58 by Proposition 19 as expressed on the California BOE website:
California Proposition 19 changes to Proposition 58California Proposition 19 changes to Proposition 58

The two most significant changes made to Proposition 58 by California Proposition 19 are the restriction to occupancy and the new $1,000,000 benefit limit on a primary home. Even once these changes to Prop 58 are in place, there are still significant benefits available to California residents who inherit a home from a parent. Providing you intend to occupy the home as your primary residence so can still save as much as $10,000 annually in property tax savings.

If you, a family member or client has questions on California Proposition 19, or would like a free benefit analysis on how much you may be able to save by taking advantage of a parent to child property tax transfer, please call us at 877-464-1066.