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Barrister
Barrister, Attorney
Category: Estate Law
Satisfied Customers: 34272
Experience:  16 yrs estate law, real estate. Wills/Trusts/Probate
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I am the executor of my fathers trust, which became irrevocable

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I am the executor of my father's trust, which became irrevocable upon his death. We linve in California. My mother had already passed and left no trust. We placed the house in the trust, and as with much else, when sold the profits are to be split amongst the three siblings. The trust gives me the ability to encumber debts to the trust, etc. to maintain the estate. Question: We need to get a home equity loan to fix up the house before it goes on the market. It is very dated, and some things just HAVE to be done to get sold at anything below rock bottom price. So, my question is: Can I get a home equity loan on the house? We approached one bank, and they said we would have to remove the home from the trust, and get a loan in the name of all three siblings. This doesn't make sense to me, and given family politics, not a good idea... Any advise would be helpful. Thank you
Hello and thank you for using JA! My goal is to provide you with excellent service and help with your legal problem.
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Can I get a home equity loan on the house?
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I actually ran into the similar situation with a client where their house was in a revocable trust and they wanted to refinance the mortgage. The bank is hesitant to agree to loan money to a trust simply because it likely has no income to support a loan payment. Since the trust owns the house, it would be the trust that would be applying for the loan through you as the trustee. It would essentially be the same thing as if an individual applied for a loan without a job or any source of income.
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With that said, the way the client got around it was for the trustee to sign the loan applicatoin and then the grantor (who was still living) signed the loan application as a cosigner. But since it is irrevocable now, the bank may require all beneficiaries to sign off as cosigners on the loan.
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And yes, some banks are a little more experienced in dealing with trusts and financial issues they face simply through working with them. Smaller banks are less likely to have dealt with trusts before and give you the "deer in headlights look" when you tell them that the trust needs to take out a loan.
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Thanks.

Barrister

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If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.

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I cannot enter into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. The information provided is not a substitute for a local attorney’s legal advice.


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In this situation, the bank would likely agree to make the loan if you as trustee signed personally for the loan so they have someone other than just the trust on the hook if the loan isn't repaid.
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Customer: replied 3 years ago.

So, that makes sense. The trust doesn't have income, so it "looks" like you're loaning to someone who doesn't have money.


 


So if I am reading this correctly, probably going to a larger bank with someone who really knows this stuff is the ticket. And the three beneficiaries would probably need to cosign - that shouldn't be a problem. But, this isn't somehow illegal, impossible, etc. It's just finding the right bank, etc. who knows what they are doing? Just checking. thanks,

Yes, I would suggest a larger bank that would have a trust dept that is used to dealing with trust issues.
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But no, it isn't in any way illegal as you have the authority as trustee to encumber the assets of the trust. It is just that the bank that may require additional security in the form of co-signers as the beneficiaries since they are the ultimate recipients of the property. If this is a short term loan that is not very large compared to the equity in the property, then the bank might just require you to sign off personally and not every beneficiary.
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Thanks.

Barrister

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If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.

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I cannot enter into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. The information provided is not a substitute for a local attorney’s legal advice.

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