We Make Loans To Irrevocable Trusts Easy

California Lender for Loans to Irrevocable Trusts - The Cash You Need To Distribute A Trust

Commercial Loan Corporation is a California Lender specializing in Loans to Irrevocable Trusts. We lend the cash you need to distribute a trust and receive your proposition 58 exclusion from property tax reassessment on an inherited home.

Loans to Irrevocable Trusts in California

When it comes time to distribute an irrevocable trust and funds are needed to make an equal distribution, you will find that most lenders are unwilling to lend on real estate that is held in a trust. This becomes extremely problematic if you plan on filing for a California Proposition 58 exclusion from property tax reassessment on real estate being inherited from a parent.

One of the requirements to qualify for an exclusion from property reassessment is for the trust to make an equal distribution of the trust assets to all child beneficiaries. Often times that is not possible to do if one of the trust assets is an expensive piece of California real estate. In the situation where a home is creating an unequal trust distribution, a mortgage or third party loan must be taken out to infuse the trust with enough cash so that the equal distribution can be made. That way one child receives the encumbered property while others receive cash and or other assets, equalizing the distribution of the trust. The state does not allow for the acquiring beneficiary to use their own funds to equalize the distribution. Doing so would create a sibling to sibling buyout and make the beneficiary ineligible for an exclusion from reassessment. That is why a third party loan is required. The problem is that most California lenders will require that the property be removed from the trust in order to lend on the home. Unfortunately, once that is done, you have jeopardized your ability to qualify for the Prop 58 property tax reassessment exclusion since the assets of the trust were distributed unevenly at that point.

The solution is to have a mortgage placed on the home while the property is still held in the irrevocable trust. That is where Commercial Loan Corporation comes in. We are a leading California lender of mortgages for homes held in an irrevocable trust. What makes us unique is that we lend to the trust as opposed to a beneficiary; allowing the beneficiary to qualify for the California Proposition 58 exclusion from property tax reassessment on a home inherited from a parent.

If you, a client, or someone that you know is in need of a loan to a trust, please have them call us at 877-464-1066. We specialize in the process and can answer any questions that they may have. We can also provide them with a free loan benefit proposal. The proposal compares the cost of the trust loan to the benefits received from a Prop 58 parent to child property transfer, ensuring that the trust loan is beneficial.  We can also determine how much additional funds you would receive by maximizing your trust distribution. On average we help clients distribute an additional $42,000 to beneficiaries my maximizing their trust distribution.

Call Us At 877-464-1066

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!

Trust & Estate Loan Benefit Calculator

Trust and Estate Loan Benefit Calculator

Trust and Estate Loan Benefit Calculator

Trust & Estate Loan Calculator

Are you are considering taking out a third party loan in order to equalize a trust or estate distribution and take advantage of California’s Proposition 58’s exclusion for Property Tax Reassessment? The act of doing so has saved some of our clients thousands of dollars annually and in most situations it makes sense to do so if you plan on keeping the home for more than just a few years. To make sure that the loan is financially beneficial, it is important to compare the costs of the loan with the expected property tax savings. At Commercial Loan Corporation we do not want to provide a loan to a client if it is not in their best interest and that is why we have created the Trust & Estate Loan Benefit Calculator.

Our easy to use trust mortgage calculator only requires you to enter a few fields of information and then does the rest of the work for you! Simply input the current value of the property in question, the number of siblings who have an interest in the property, the existing low Proposition 13 protected property tax rate and your desired loan amount. From there we can estimate everything from your Prop 58 Property Tax Savings, your proposed loan costs and the time it will take you to recoup your loan expenses. Here is an example of what our easy to use Trust Loan Benefit Calculator looks like:

Trust Loan Calculators

Trust Loan Calculators

Try Out The Trust & Estate Loan Benefit Calculator

Our Trust & Estate Loan Benefit Calculator is free and easy to use. Click here to try it our for yourself. If you have any problems using the calculator, or have questions on trust or estate loans or would like to start the loan process, please call us at 877-464-1066. The Trust Loan Calculator is meant for estimation purposes only. When we speak with you, we will provide you with a detailed trust loan cost estimate and help you to determine you exact Proposition 58 property tax savings. Often times we are able to complete your trust loan process in under 10 days!

 

Parent to Child Transfer and Exclusion for Reassessment of Property Taxes

When a Property is Held in an Illiquid Trust

When the time comes for the distribution of a family trust, often times one of the children-beneficiaries wants to hold on to real property held in the trust. Usually, the property can be transferred along with the Proposition 13 tax base. This can save several thousand dollars in property taxes. If the trust has multiple beneficiaries and there are enough liquid assets to make an even distribution, it is a relatively easy process to obtain the exclusion for reassessment by filing the proper paperwork with the county assessor (Form BOE-58-AH).

 

What if the Trust is Illiquid?Keeping the exclusion for reassessment when transferring real property to a child-beneficiary can be trickier if there are not enough liquid assets in the trust to make an even distribution. The acquiring beneficiary may want to contribute personal funds to provide liquidity in the trust for an even distribution. This may not be a good idea. The Board of Equalization (BOE) may view this as a sibling buying out the interests of another sibling(s) as opposed to a parent to child transfer. The BOE may reassess the property in this situation. So what do we do? I am glad you asked me that. The BOE allows the trust to borrow from a 3rd party (not one of the beneficiaries) to provide liquidity. The loan must be to the trust without a personal guarantee by the acquiring beneficiary. The BOE may view a loan with a personal guarantee by the acquiring beneficiary the same way it views a contribution of capital to the trust by the acquiring beneficiary.

 

Getting a 3rd Party Loan

You would think this would be easy. Unfortunately, conventional lenders (banks, mortgage companies)

do not like to lend to trusts and their Deeds of Trust are written with alienation clauses. That means when title to a property changes, the lender can call the loan due. When a trust is distributed, the title to the property will change from the trust to the acquiring beneficiary and the alienation clause would be triggered.

Another option is private money lenders (hard money). These are lenders that have investors, usually individuals, willing to lend their money for a certain rate of return. These individual investors frequently have a requirement that at least 90 days of interest be paid. Some private money lenders charge a prepayment penalty to insure their investors receive 90 days of interest. Private money lenders will typically charge 2 to 3 points on top of the interest rate. This can get expensive.

Finding a family friend or relative that is not a beneficiary and is willing to lend money to the trust may be the best option (least expensive).  Unfortunately, this may be just as difficult as finding a conventional lender willing to lend to a trust.

 

Commercial Loan Corporation will make these 3rd Party Loans?

There are not many companies doing these loans currently (October 2017). Commercial Loan Corporation in Newport Beach, California is actively lending to trusts. We do not charge prepayment penalties, so loans can be repaid quickly to avoid paying above market interest rates. These loans are not cheap and we provide a cost/benefit calculator on our website. It is important to determine how much one will save in property taxes each year versus the loan costs. The calculator will show how many years it would take to recoup all of the loan costs with property tax savings. If the property will not be held long enough to recoup all of the loan costs, it does not make sense to get a 3rd party loan. In most circumstances the property will be held much longer than the break-even point and the property tax savings will be a great benefit.

 

What are Commercial Loan Corporation’s Lending Criteria?

  • Property must be non-owner occupied.
  • Preferred loan amount does not exceed 65% of the property’s appraised value (Exceptions have been made for high credit score borrowers with liquid assets greater than the loan amount).
  • There is a plan for repayment by refinance or verified liquid assets (If refinancing, an approval letter is needed from an approved conventional lender).
  • Loans are recorded in the 1stlien position (Loans in the 2nd position are considered on a case-by-case basis).
  • Title insurance is required on all loans
  • Third party escrow is required on all loans
  • Appraisals completed for the trust may be acceptable with a review by a third party appraiser chosen by Commercial Loan Corporation.