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socrateaser, Attorney
Category: Estate Law
Satisfied Customers: 37846
Experience:  Retired (mostly)
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Thanks! The loan is simply down payment on land on which to bui

Customer Question

Thanks! The loan is simply for a down payment on land on which to build a house; roughly $34,000. The loan for the remaining is from a conventional lender. The trust has over $500,000 in it. Is there a way to secure it with the other portion of the trust that ($250,000) that I would be beneficiary of? If so, could it be written that if the property is still not re-paid for in full at time of death that the property.
The Trust is very generous in its wording:
My Trustee may make loans to any person including a beneficiary, as well as an entity, trust, or estate, for any term or payable on demand, with or without interest, and secured or unsecured.
Submitted: 6 months ago.
Category: Estate Law
Customer: replied 6 months ago.
My Trustee may make loans to any person including a beneficiary, as well as an entity, trust, or estate, for any term or payable on demand, with or without interest, and secured or unsecured.
My Trustee may encumber any trust property by mortgages, pledges, or otherwise, and may negotiate, refinance, or enter into any mortgage or other secured or unsecured financial arrangement, whether as a mortgagee or mortgagor. The term may extend beyond the trust’s termination and beyond the period required for an interest created under this trust to vest in order to be valid under the rule against perpetuities.
My Trustee may enter into, negotiate, or modify the terms of any mortgage or any other secured or unsecured agreement granted in connection with any loan entered into by me individually or by any Trustee, and may release or foreclose on any mortgage or security interest payable to me or to the trust.
My Trustee may borrow money at interest rates and on other terms that my Trustee deems advisable from any person, institution, or other source including, in the case of a corporate fiduciary, its own banking or commercial lending department.
My Trustee may purchase, sell at public or private sale, trade, renew, modify, and extend mortgages. My Trustee may accept deeds instead of foreclosing.
Expert:  RayAnswers replied 6 months ago.
Hi and welcome to JA. Ray here to help you today. The trustee is the trust permits may lend money to you.You would do a promissory note here, the trustee can collect from your share of the trust in the event of default.This is certainly possible as long as the trust allows for such loans and it does so as you indicate.The trust would be able to recover from your share in the event of default.It doesn't have to be secured here, they have recourse and are protected inn such a situation with the promissory note. I appreciate the chance to help you today.Please let me know if you have more follow up.Thanks again.
Expert:  socrateaser replied 6 months ago.
Hello, this is the original contributor who answered your previous question. The answer to your question here is that because of the trust terms, it would be extraordinarily difficult for a beneficiary to claim that you were engaged in a conflict of interest, because the trust terms permit you a great deal of latitude in managing the trust money. Consequently, you would give a deed of trust to the trustee (which is, of course, you), and sign a note obligating you to repay the loan. That way, a successor trustee can recover from you, in the event that you do not pay the loan, or you pass away unexpectedly. I also note that despite the broad terms of the trust, there is no waiver of liability for a conflict of interest. Consequently, the trust terms, could be interpreted to mean that you can borrow or loan money to anyone other than yourself. You don't want to get into an argument over this with another beneficiary after the trustor passes. So, regardless of the broad trust language, you want to try to engage in the transaction as if it were "arm's length." Otherwise, there is a risk, and you could be setting yourself up for a court battle in the future. I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.Thanks again for using Justanswer!

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