Recently PropertyTaxNews.org conducted an interview with Commercial Loan Corporation Trust & Estate Loan Account Executive Thad Farrell on the benefits of California Proposition 19 and a loan to an irrevocable trust. Here are some of the highlights from that trust loan interview.
Mr. Thaddeus Farrell is an Account Manager at Commercial Loan Corporation in Newport Beach, California. He arrives from a long, successful career in mortgage banking and is considered a rising star in the Trust Loan marketplace. We were fortunate to have Mr. Farrell agree to share his views on property tax transfers, California Proposition 19, and irrevocable trust loans for new homeowners and beneficiaries in California. ______________________________________________________
Property Tax News: As an account manager with Commercial Loan Corp who do you generally communicate with, on a daily basis?
Thaddeus Farrell: I usually talk to attorneys, licensed fiduciaries, trust or estate administrators, Conservators, trustees, beneficiaries and executors. Mostly regarding their need to keep a parents low property tax rate on an inherited home. Frequently, I follow up with attorneys and work with them during the trust loan process. Part of my job is to help them help their clients. In terms of driving interest from lawyers or CPAs I may be talking to. It’s case by case, and timing, as to what an existing client is in need of at this or that very moment.
Property Tax News: In your opinion sir – what is the most important way Proposition 19 helps families inheriting property in California?
Thaddeus Farrell: Overall, to assist families with their property taxes, transferring property taxes through Proposition 19 as well as helping with buying out co-beneficiaries’ inherited property shares.
Property Tax News: What is it precisely that these California families are trying to accomplish?
Thaddeus Farrell: Simply put, to transfer their parents’ low property tax base. Look at it this way – property reassessment can cripple a family financially. I look at it like this – expenses are a part of life, and when you inherit a family home, if the property is reassessed at current rates, those expenses will usually go sky high. Most middle class people can’t afford to pay that type of tax hike. They want to take advantage of Proposition 19 and a trust loan, transferring CA Property Taxes from a Parent to an Heir tax break, to avoid property tax reassessment, and move into an inherited home within a year as a principle residence, which was their parents’ principle residence formerly protected by Proposition 58 and Prop 13.
Property Tax News: How does Commercial Loan Corp fit in, put very simply?
Thaddeus Farrell: We guide beneficiaries through a process that will maintain their parents’ low property tax base. Usually siblings that want to retain inherited property from parents come to us first, generally after being referred to us by a California Property Tax Consultant, Law Firm or a Trust and Estate Attorney. Middle class families that can’t afford to pay reassessed taxes on an inherited home… Which pretty much sums up most families these days!
Property Tax News: What do you discuss with these attorneys that you speak to about Proposition 19 and a trust loan saving their clients money on property taxes?
Thaddeus Farrell: I make it very clear right away with attorneys that siblings inheriting a home have two options. They can sell or keep their inherited property. In other words, your family has to make up their mind – what they want to do, sell or keep. Selling it is far more expensive. By keeping the home, each beneficiary receives approximately $15,000 extra in a cash trust distribution when compared to selling the home because they avoid costly realtor and real estate sale expenses. The child beneficiary keeping the inherited home winds up saving on average $6,200 in yearly property taxes.
Property Tax News: Is it really true that residents save that much?
Thaddeus Farrell: Absolutely! A realtor typically charges 6%, there can be costs to prepare the home for sale and closing costs such as title, escrow or assistance with buyer closing costs on top of that. If the property is reassessed – the cost can be very high.
Property Tax News: And we understand you treat everyone the same, regardless of their property’s value, or their net worth.
Thaddeus Farrell: That is correct. We extend the same commitment to everyone. I for one treat each customer like I would treat my brother or my sister. We have never had one unhappy customer in the last three hundred transactions I’m aware of. Five star reviews, five-star Google ratings, no complaints!
Property Tax News: Thad, if someone needs assistance with California Proposition 19, a bridge loan to make an equal distribution to an estate or a trust loan to an irrevocable trust, how can they contact you?
Thaddeus Farrell: They can contact us at (877) 464-1066; we are always happy to help.
Property Tax News: Great. Well, thanks for talking with us today.
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.
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 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.
Please join us this November 13th for the Virtual 46th Annual USC Gould Trust and Estate Conference. We are sponsoring the event again this year and will be available to answer any questions you have on Lending to an Irrevocable Trust or Probate Estate. Our loans assist clients in qualifying for the California Prop 58 Parent to Child Exclusion from Property Tax Reassessment on an inherited home.
Tanis Alonso, one of our Trust & Estate Loan Senior Account Executives will be available for Zoom meetings during the Conference or available by phone at (877) 464-1066 to assist you and provide you with more information on our specialized lending programs. Commercial Loan Corporations is one of the only lenders in California who will lend to an Irrevocable Trusts, allowing our clients to meet the California Board of Equalization requirements to qualify for their Exclusion from Reassessment.
This years USC Gould Trust & Estate Conference Features Information on the following
Keynote Presentation: Bending the Arc of History with Terrence Franklin Practical Topics: Annual Updates, Trustee and Beneficiary Harmony, Anti-SLAPP, Divorce, Stretching Retirement Savings, and Sub-Trust Allocations CE Credit: MCLE, CPE, CFP, PFB, and CTFA (Pending)
8:30 AM – 8:35 AM (PST) Welcome and Introductions 8:35 AM – 10:05 AM (PST) Annual Update: Recent Developments in Probate and Trust and their Practical Applications 10:05 AM – 10:20 AM (PST) Break Sponsored by Professional Fiduciary Association of California 10:20 AM – 11:20 AM (PST) Love in the Time of COVID-19: Trustee and Beneficiary Harmony in Years Like 2020 11:30 AM – 12:30 PM (PST) No-Contest Clauses and the Anti-SLAPP Statute: Traps for the Unwary 12:40 PM – 1:20 PM (PST) Keynote Presentation Sponsored by Signature Resolution: Bending the Arc of History Towards Justice in the Probate Court 1:20 PM – 1:40 PM (PST) Break Sponsored by Jack Barcal, Esq. 1:40 PM – 2:40 PM (PST) Tales from the Dark Side: HELP, My Client Is Getting Divorced (or Married, or Remarried). What Do I Do? 2:50 PM – 3:50 PM (PST) How to Stretch Retirement Savings with a CRUT 4:00 PM – 5:00 PM (PST) Better Late Than Never? The Looming Implications of Late Allocations to Sub-Trusts
For more information on our loans to irrevocable trusts and probate estates, please call us at 877-464-1066. We can provide you or your client with a free cost benefit analysis and let them know exactly how much property saving can be attained by taking advantage of a parent to child property transfer and exclusion from property tax reassessment.
Parent Child Exclusion From Property Tax Reassessment
Commercial Loan Corporation specializes in helping clients qualify for California Proposition 58’s Parent to Child Exclusion from Property Tax Reassessment with our Trust and Estate loans. You may be wondering what the parent to child exclusion from property tax reassessment is. When a parent passes and leaves a child real estate in California, Prop 58 grants the ability for a child to also inherit the parents low property tax base on the property if certain conditions are met and the appropriate documents are submitted correctly to the county tax assessors office.
How does Commercial Loan Corporation help in that situation?
Often times when there are multiple children involved and one of those children want’s to inherit the property and keep the parents low property taxes, the county assessors office will require an equal distribution of assets be made to all children. Unfortunately most Trust & Estates do not have sufficient cash assets for an equal distribution to be made and that may result in the inherited home being reassessed. Commercial Loan Corporation can assist clients in that situation. Unlike most California lenders, we specialize in assisting customers with the California Proposition 58 parent to child exclusion from property tax reassessment. In fact, we are one of the only California lenders that will lend directly to an Irrevocable Trust with no personal guarantee from the acquiring beneficiary which is often a Board of Equalization requirement when the property is held in an irrevocable trust and multiple beneficiaries are involved.
If you, a family member or a client of yours is inheriting property and are interested in transferring a parents low property tax base please give us a call at 877-464-1066. We can answer any questions you may have and provide you with a free analysis of how much your might be able to save by taking advantage of the California Proposition 58 Parent to Child Exclusion From Property tax Reassessment.
We sat in with noted Proposition 58, trust loan expert – Tanis Alonso, at Commercial Loan Corporation in Southern California. Tanis has a uniquely profound, global understanding of the entire trust loan process; and applies a very human, not simply financial, viewpoint to the process ~ as does the entire team at the cloanc.com organization; with a strong, genuine focus on “helping people” not simply implementing financial transactions…
Property Tax Transfer: Thank you so much for agreeing to chat with us about Proposition 58 and trust loans today…
Tanis Alonso: Of course. It’s my pleasure.
Property Tax Transfer: Great. Tanis, can we take a close look at how the basic trust loan process works in California, from your perspective, as a lender – and from the point of view of your average everyday beneficiary, many who need to keep parents property taxes… Some who want to sell a property they are inheriting from their parents – and of course the other beneficiaries to a trust or estate that are determined to keep that home, and fight that sale. But first, who is your typical caller? Who in the estate or trust scenario tends to reach out to you first?
Tanis Alonso: Basically, whomever is trying to not sell the inherited property – is generally the initial caller to my office. It might be the trustee, frequently at odds with certain beneficiaries… Or very often it’s a family member, one of the beneficiary’s to the trust that doesn’t want to sell that home.
Property Tax Transfer: Got it. So, what does an average Proposition 58 property transfer and trust loan scenario in California look like, contributing to peace of mind for property owners? There must be similar scenarios, that reflect average trust or estate outcomes all across the state.
Tanis: Absolutely. One of the most common scenarios we see, here at Commercial Loan Corp., are elderly parents, for example… who, sadly, pass away, leaving loved ones behind. So, let’s say there is an estate, or perhaps a trust, and there are three beneficiaries involved… And property is the only asset… Let’s say there are no cash accounts. And this is not uncommon these days.
Property Tax Transfer: Yes, we hear that it’s quite common to see a trust inheritance, or probate estate, where there is very little cash left at the end of the road…
Tanis: Exactly. Parents who pass away in their nineties let’s say, who basically have spent most of their cash assets that were in savings, or in stocks and bonds, and by the time they get into their mid or late nineties, those assets are mostly gone, cashed out or spent –
Property Tax Transfer: OK. So there isn’t much money left in many inheritances… So what do beneficiaries do? When do these conflicts we hear so much about begin, when a house is being inherited by several beneficiaries… some who wish to sell, and some who prefer to keep the property, and to keep parents property taxes?
Tanis: Well, here is a typical middle class inherited real estate scenario – let’s say, for example, there are three beneficiaries and no other assets being inherited except an older home. One beneficiary wants to keep the house, to keep parents property taxes; while the other two siblings prefer to get cash from an immediate house sale, probably through a nearby realtor. But – instead of selling to a buyer, here is where Proposition 58 and a trust loan comes into play, providing liquidity and compliance with the Proposition 58 tax system – furnishing the two siblings who prefer to sell, with enough cash liquidity as if they had sold their shares in the inherited property to a buyer…
Property Tax Transfer: So why not sell? Why the trust loan?
Tanis: Because with a loan to a trust there is the upside of less expense. Frequently, we’re talking about ten times less of an expense than would normally be involved in a house sale. Again, a process compensating beneficiaries through a trust loan, instead of a house sale or coming up with the cash yourself… versus a formal house sale through a realtor that would cost approximately ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc…
Property Tax Transfer: Paying off the beneficiaries who wanted the cash from a house sale in the first place, right?
Tanis (Commercial Loan Corporation): Exactly. And so the rest of the trust loan goes to pay for 100% of parents Proposition 13 tax base – and the Proposition 58 tax system makes it possible to transfer the property to the beneficiary or beneficiaries that did not want to sell – to keep parents property taxes at the low Proposition 13 tax rate – or involving Proposition 193 if it is real property, not left by the parents, but by grandparents.
Property Tax Transfer: You say ten times less on expenses versus paying for it yourself?
Tanis Alonso: Absolutely. It costs the families we help far less to get a trust loan from us, believe it or not, then it does if they were to dig into their own savings to complete the Proposition 58 property transfer process.
Property Tax Transfer: How does that translate in terms of real numbers?
Tanis Alonso: Let’s say a property value is currently one million dollars and the current tax base is $1,200. If they were to get reassessed at current value that would be around $11,000 annually. By someone keeping the property and obtaining a trust loan to properly buy out their siblings that allows the beneficiary that is keeping the property to keep parents property taxes, to retain 100% of the Proposition 13 tax base that was paid by their parents and keep that low property tax base of $1,200. This of course creates much greater affordability than if they were to improperly buy out their siblings and have that property reassessed. The loan to trust goes hand in hand with the Proposition 58 property tax transfer system, creating enough liquidity to equalize distributions, not sell, and allow a beneficiary to keep their parents property with their low property tax base.
Property Tax Transfer: It sounds counter intuitive, doesn’t it. Tanis Alonso: I know, it does sound counter intuitive – yet it’s true. All you have to do is run the numbers yourself, and you’ll see what I’m talking about. It’s a better way to be able to keep an inherited house in the family, and to keep parents property taxes, when there is a dispute going on that pits the beneficiary who wants to keep a house against the beneficiaries that want to sell that home. A home that a family has so many memories associated with; with such strong emotional attachments to. There are so many wonderful family memories that are attached to each home. And every home is unique and different in that sense, just as every family member is different and unique.
Property Tax Transfer: You mean emotional memories you can’t replace with cash, in fact you can’t buy for any amount of money.
Tanis Alonso: That’s right. Anyway, this process allows families to keep that home in the family. And that’s the most important point!
Property Tax Transfer: It is the crucial point.
Tanis Alonso: Absolutely. And as a person on the front lines for this firm, neither I or Commercial Loan Corp. view each trust loan scenario as simply a “financial transaction”. Nor do we see the home they’ve lived in for decades as just a “piece of real property”. To us, this a “piece of family history” in the making. And the process a family decision, not a “transaction”. We see our clients as real families that we’re helping, financially and emotionally, not just as clients signing a contract for a trust loan. For us it’s much more than that.
Property Tax Transfer: It’s very obvious that you really enjoy helping people… getting them money when they really need it – and saving them on the cost side in the bargain, with trust loans.
Tanis Alonso: Correct. We see them as real people that we’re able to help in a time of need. For us it’s so much more than cash and property – we don’t view it that way. We’re talking about family history here. Not just “another deal”.
Property Tax Transfer: Tanis, let me ask you… Beneficiaries that call your company, desperate to keep parents property taxes; for any solution to their property transfer / Proposition 58 issue – is it a safe bet to assume that 99% of the time there are elements that come up again and again?
Tanis: Well, that’s true, to a point. With beneficiaries that call us, with a trust or estate situation, there is always real property being inherited, going to one or several beneficiaries… and little, if any, cash – and each family always has different dynamics. There are always differences, as regards the people and details involved. But, the one constant you can be sure of is that there is always someone who wants to sell… and always someone who wants to keep the property they are inheriting… dead set against selling.
Property Tax Transfer: And at the end of the tunnel, is it safe to assume that with your company it’s generally a win-win equation, for everyone involved. Everyone involved, more or less, get what they want, right?
Tanis Alonso (Commercial Loan Corporation): That’s right. 99% of the time. The beneficiary, or beneficiaries, that want cash from the sale of the property that they’re inheriting, get the cash they were looking for, from the trust loan…
Property Tax Transfer: And the beneficiary or beneficiaries that want to keep the house, get to keep that house, and keep parents property taxes…
Tanis: Yes! And let me say that, typically, this is a really, really big win for them – as the siblings that wanted to sell are usually very vocal, and very aggressive about their desire to do so! That beneficiary that wants to keep that property, that is also able to get the other siblings a large amount of cash for their shares in the inherited real estate – while still being able to keep the home they’re so attached to, and keep parents property taxes; keeping parents property tax rate. This would be practically impossible, were it not for our trust loan. And there’s your win-win equation!
Property Tax Transfer: And what about the cost factor? Costs involved in the equation… How does everyone benefit on that level, getting cash to the beneficiaries that wanted cash from a house sale? Versus coming up with property buyout cash themselves…
Tanis Alonso (Commercial Loan Corporation): OK, so cost involved, selling versus keeping inherited property. I’ll try to keep the equation simple. Costs associated with this property funding process through a trust loan, paying for everything, including beneficiary property shares buyout, taxes, etc. is, on average, 3.5% – So by someone keeping the family property everyone will receive more money than if they were to sell the property at approximately 6.5% in costs. The average trust receives $45,716 more to distribute than if they were to sell the property to some random buyer. Each beneficiary on average is receiving $16,652 more by someone keeping the property, instead of selling it. And our average annual tax savings is $6,043. We have already saved a combined amount just shy of 1 million dollars for our clients on property taxes. That is a significant benefit for all beneficiaries when someone keeps the property instead of selling it!
PropertyTax Transfer: So you’re saying those savings would have been completely lost, per beneficiary, if they had sold out to a regular buyer…
Tanis Alonso (Commercial Loan Corporation): That’s right. For example, say it’s you and your sister. A major conflict. You want to keep the house you’re all inheriting from your parents, plus keep parents property taxes. Why should I let my sister sell? The solution there is because you are going to get more cash in your hands than if you were to sell the property! That’s the bottom line. A trust loan transaction takes 7-10 business days whereas selling will take a few months. Everyone receives more money, more rapidly, then if they were to sell the property on the open market. Everyone benefits from this… it’s win-win all the way around.
PropertyTaxTransfer: So you let your sister sell, so everyone wins – is what you’re saying.
Tanis: Of course! Let her sell, let her get her way – and you end up getting your way… you get what you wanted, to keep your house with everyone paid off and happy. No more conflict. On a $500,000 property – do you want to spend 6.5% to sell that property, with a realtor, or 3.5% through our trust loan, in keeping with the Proposition 58 tax system? Which number would you want to give away, 6.5% or 3.5%?
PropertyTax Transfer: Naturally. So the long range picture looks like increases in taxes as well, so that’s not as affordable either.
Tanis: Absolutely right. In certain cases a property tax reassessment can add an extra $700 to $1000 per month to your property taxes. That’s an extra $1,000 per month – not per year! Month after month. That is affordability vs not affordability to many.
Property Tax Transfer: Going through the Proposition 58 tax system, with the trust loan paying everyone off… What would property taxes look like going down that road?
Tanis: OK so the question is, “why do I need a trust loan to buy out beneficiaries who want to sell our inherited house?” The answer is you can still keep the house you’re inheriting, and not spend any of your own money in the process. The importance of the trust loan is that you can buy out your siblings and still keep parents property taxes. You keep 100% of the low Proposition 13 property tax base that was originally paid by your parents. If you were to use your own money to buy out your siblings, the State Board of Equalization would see that as a sibling buying out a sibling – and that would definitely trigger a property tax reassessment. Naturally, the result of that would be higher taxes. So you need the trust loan to buy out your siblings in order to take advantage of Proposition 58, and keep the low property tax base.
Property Tax Transfer: Most people don’t have that kind of cash on hand nor do they want to use all of their cash for this just to buy out beneficiaries in an estate setting. Especially if the numbers go higher…
Tanis Alonso (Commercial Loan Corporation): Beneficiaries who want to keep their inherited property still put a lot more money in their pocket, still save a lot more, by not using their own funds… by buying out beneficiaries that want to sell by going the trust loan route. Staying within the discounted Proposition 13 tax base, being able to keep parents property taxes … taking advantage of the Proposition 58 property tax system, or tax shelter. Using this tax shelter that we looked at before, if you recall – would be around $1,200 per year on a million dollar property. Saving thousands of dollars annually on property taxes by taking advantage of Proposition 58; keeping their parents low property tax base.
Property Tax Transfer: Yes, the difference in the numbers are stunning.
Tanis Alonso (Commercial Loan Corporation): Yes it is. So if you use your own money to buy out your siblings you will trigger a reassessment… if that was reassessed normally, without doing the property transfer and beneficiary payoff with our trust loan – you’d be looking at an $11,000 tax hit per year on the same million dollar property! If reassessed at the current, present day, base rate – that tax hit goes up 10 times. A significant difference in cash back in your pocket after it’s all done and said. Trust loans are a huge benefit for all of these families and that’s how we’re able to really help people in a significant way.
Tanis Alonso: Absolutely. And helping people in this way is what it’s all about! That entire viewpoint is the basis for this whole company, from the top down – starting with the CEO, who is a truly terrific guy, who genuinely loves helping people, with money, memories, and time. And you can’t replace memories and time!
Property Tax Transfer: You can’t replace memories and time… Very well put! That is a concept to remember.
Tanis Alonso: It is so important to remember, when you truly care about what happens to the people you’re helping.
Property Tax Transfer: Very true. Your clients are lucky to have you folks working for them. Thanks so much for speaking with us today.
Tanis Alonso: Thank you. It was a great pleasure chatting with you.
If you have questions about a loan for an Irrevocable Trust, or about California Proposition 58, please call Tanis at 877-464-1066.
Recently there has been debate in California if Proposition 13 and Proposition 58 still make sense. Without hesitation, the answer is yes. In June of 1978, California voters passed Proposition 13 with 65% of the total vote. Still, to this day, interestingly enough, 65% of “likely voters” in California still support the Proposition 13 this tax relief initiative.
California Prop 13 stabilized property taxes for Californians and gave a great incentive that encouraged Californian’s to become homeowners. The Proposition 13 tax break made property tax increases more affordable by limiting them to a maximum of 2% annually. Californians are fortunate enough to still be benefiting from this same formula 42 years later.
Proposition 58 works in conjunction with Proposition 13. Prop 58 allows a parent to transfer their Proposition 13 protected property tax base to a child. This is especially important when a child inherits a home from a parent. Prop 58 allows the child to inherit the home without having the property taxes reassessed, saving potentially thousands of dollars annually. This can make a home that may otherwise be unaffordable for the child, now affordable.
When it comes time to distribute the assets of an irrevocable trust, a trust loan may be needed if an equal distribution is required or desired. A trust loan provides the trust with liquidity; supplying cash so that assets do not need to be sold off or converted to cash. The trust loan is a mortgage placed against a piece of real estate held in the trust. Unlike a traditional mortgage, a trust mortgage loan is typically a short term loan. Once the assets of the trust are distributed, the beneficiary who inherited the real estate with the trust mortgage placed on it would refinance the trust mortgage with a conventional mortgage or payoff the mortgage.
Why Is An Equal Distribution Important?
When it comes to a trust distribution, an equal distribution can be important for a variety of reasons. Often times there is language in the trust that requires an equal distribution of the assets in the trust be made to beneficiaries. If the trust only contained cash, it would be easy to accomplish this. Unfortunately, most trusts that contain real estate do not have cash or other assets sufficient to create an equal distribution. In this situation, either the real estate must be sold or a mortgage must be taken out on the real estate to infuse the trust with cash. A trust loan is almost always the least expensive of the two options. Sometimes, more importantly, it also allows a beneficiary to keep a family home in the family.
Another important reason for the equal distribution of a trust is to meet the requirements of California Proposition 58. Prop 58 allows a child who is inheriting a home from a parent to avoid property tax reassessment on that home. This passes the low proposition 13 protected tax base from a parent to a child. Often times when the home is held in a trust, an equal distribution is required if a Proposition 58 exclusion from reassessment is to be granted by the County Tax Assessors office. In fact, the majority of trust loans that we provide are specifically for this reason. Our clients save on average over six thousand dollars per year in property tax savings by avoiding reassessment.
Do All Lenders Loan To Irrevocable Trusts?
No, in fact very few lenders are willing to lend to a trust, let alone an irrevocable trust. Typically when a home is held in a trust, a conventional lender will require that the property first be removed from the trust before they will lend on it. When a trust is revocable, this may not be an issue since the home can be added back into to trust once the mortgage process has been completed. Once the trust becomes irrevocable, often times the ability to do so is no longer possible and a lender who can lend to Irrevocable Trusts will be required.
When the requirements of Proposition 58 need to be considered, the situation can become even more complicated. Proposition 58 requires that the acquiring beneficiary of the real estate makes no personal guarantee on the trust loan or trust mortgage. Doing so would be perceived as a sibling to sibling transfer of real estate as opposed to a parent to child transfer and would likely jeopardize the exclusion from property reassessment. Commercial Loan Corporation is one of the only lenders in California that provides Irrevocable Trust Loans with no personal guarantee requirements. We work directly with Trust Administrators, Trustees, Beneficiaries, Attorneys and Property Tax Consultants. If you require a Trust & Estate Attorney or Property Tax Consultant to assist you with Proposition 58, we can refer you to an expert to assist you.
Is A Trust Loan Less Expensive Than Selling A Home?
Yes, in almost all cases a trust loan is far less expensive than selling a home. Additionally a trust loan takes less time to complete than it takes to sell a home. We can complete a trust loan in as little as 10 business days. That means beneficiaries can get more money and get their funds more quickly. When you consider the ability to take advantage of the Proposition 58’s exclusion from reassessment, the savings grow even further.
We specialize in loans to Irrevocable Trusts. If you or a client are in need of a trust loan or have questions about loans to an irrevocable trust, please call us at 877-464-1066. We will provide you with a free benefit analysis and answer any question you may have.
Commercial Loan Corporation is a licensed California lender specializing in making loans to trusts and estates. Unlike most lenders who provide a broad range of loans, we focus specifically on trusts, irrevocable trusts and estates. In fact every month we help clients by providing trust loans so that an equal distribution of assets can be made. Our trust loans help beneficiaries meet the requirements of California Proposition 58 and help them to avoid property tax reassessment on an inherited home.On average we save our clients over $6,000 per year in property taxes by helping them avoid property tax reassessment.When receiving a trust loan from Commercial Loan Corporation, you can count on:
An simplified application process
Quick Approvals and Fast Funding
Our Loans Fund In As Little As 7-Days
Same Day Loan Approvals
The Highest Level of Customer Service
If you, a family member, client or friend may be able to benefit from a trust loan, please call us at 877-464-1066. We provide clients with a no cost estimate on how much might be saved by taking advantage of California Proposition 58’s exclusion from property tax reassessment.
Loans to Irrevocable Trusts
Most banks and lenders are not willing to lend on a property that is held in an Irrevocable Trust. Instead they require that the property be removed from the trust before placing a mortgage upon it. This can make it difficult if not impossible for a beneficiary to qualify for Proposition 58. If you are trying to preserve a parents low Proposition 13 property tax base on an inherited property that is held in a trust, call us at 877-464-1066 and we can help you simplify what can be a complicated process.
Qualifying for California Proposition 58’s Parent to Child Transfer
When it comes to California Proposition 58, making a mistake can cost you! Prop 58 grants the ability for a parent to transfer real estate to a child and avoid having that property reassessed. That may sound insignificant to some, but it can translate to a dramatic yearly property tax savings. In fact, the clients we assist save on average more that $6,000 per year in property taxes by taking advantage of this Proposition 58 property tax benefit.
In order for a child who is inheriting a home from a parent to qualify for Proposition 58, they must meet specific requirements. One of these requirements is that when there are multiple child beneficiaries involved and one of the children wants to inherit the home, while others wish to receive cash; the child inheriting the home can not use their own funds or personally guarantee the funds used to equalize the distribution. That is where Commercial Loan Corporation can help. Unlike conventional lenders, we provide loans directly to a trust; even an irrevocable trust. This allows our clients to avoid a sibling to sibling buyout which would otherwise disqualify them from receiving a full exclusion from property tax reassessment.
We highly recommend that you work with an attorney or property tax specialist to insure you both qualify and receive your benefit. Call us at 877-464-1066 and we can provide you with a FREE analysis of how much you might be able to save each year in property taxes. We can also put you in contact with a qualified Attorney or California Property Tax Consultant in your area if you require assistance.