Can an Irrevocable Trust Get a Mortgage or Loan in California?

Yes, an irrevocable trust can get a mortgage using California real estate as collateral for the loan. A loan will be recorded against the house in the irrevocable trust just like a normal mortgage. The successor trustee of the irrevocable trust will need to work with a specialized irrevocable trust loan lender in California such as North Coast Financial. Traditional lenders are not able to make loans against real estate owned by an irrevocable trust.

Using real estate in the irrevocable trust as collateral for the loan is typically the most cost-effective way to borrow against assets of an irrevocable trust. The irrevocable trust loan lender using real estate as collateral will charge an interest rate as well as loan origination fees. There are inheritance advance lenders that will lend against non-real estate assets within an irrevocable trust but this type of advance is often extremely expensive.

The trust documents must allow (or not specifically prohibit) for borrowing against the assets of the trust. The real estate owned by the irrevocable trust must have sufficient equity relative to the amount of funds the irrevocable trust needs to borrow. Loan amounts up to 65-70% of the current value of the property are typically available.

California irrevocable trust loan lenders usually only provide short-terms of around 12 months. This time-frame is typically plenty of time to transfer the property out of the trust and into an individual’s name and then refinance into a long-term traditional loan. Alternatively, if the irrevocable trust intends to sell the real estate 12 months should be sufficient time.

Can you Take Money Out of an Irrevocable Trust? How to Get Money Out of an Irrevocable Trust?

A successor trustee is able to take money out of an irrevocable trust if allowed by the trust documents. If the irrevocable trust doesn’t have cash assets available, the trustee may consider a short-term loan secured against real estate owned by the irrevocable trust.

Money taken out of the irrevocable trust typically needs to be used for the benefit of the trust or the beneficiaries of the trust. Common reasons for taking money of the irrevocable trust include paying debts of the trust, equalizing the distribution of trust assets to beneficiaries or fixing up a home owned by the irrevocable trust prior to selling it.

The short-term irrevocable trust loan would be paid off once the property is sold or the property was refinanced once distributed to one or more of the beneficiaries as individuals.

Can a Trustee Sell Property in an Irrevocable Trust?

Yes, a trustee can sell property in an irrevocable trust as long as the trust documents allow for it. The proceeds from the sale of the property can then be distributed to the beneficiaries of the trust.

Can a Trustee be a Beneficiary of an Irrevocable Trust? Can a Beneficiary be Trustee of an Irrevocable Trust?

Yes, a trustee can be a beneficiary of an irrevocable trust and a beneficiary can be trustee. It is common for one or more of the beneficiaries of the trust to be the successor trustee (or co-trustees).

The information provided herein is for educational purposes only. North Coast Financial is not providing any legal, tax or financial advice.