Trust Loans in California: Why They Matter & The Importance of a Trust – Big Condo Update

When dealing with inherited real estate, understanding Trust Loans is crucial, especially if one of the beneficiaries intends to live in the home. In California, a Trust Loan allows the property to be refinanced and transferred from the trust into one or more beneficiaries’ names while preserving the existing property tax rate under Proposition 13. A Trust Loan can save the new owner thousands of dollars annually by preventing a property tax reassessment.

Why Use a Trust Loan?

If a parent passes away and leaves their home in a trust to multiple heirs, but one of the beneficiaries wants to keep the home, the estate must often be settled equitably. A Trust Loan enables that beneficiary to buy out the other heirs without forcing a sale. A specialized Trust Loan provides the funds needed to complete the buyout before the title is transferred, ensuring that the property tax benefits under Proposition 13 remain intact.

Why Not Just Add a Child to the Title Before Death?

Many homeowners think they can avoid estate complications by simply adding their child to the title of their home. However, this decision can lead to significant financial consequences:

• Loss of Step-Up in Basis: When a property is inherited, the value is adjusted to the fair market value at the time of the owner’s passing. If the child is added to title beforehand, this tax benefit may be lost, potentially leading to higher capital gains taxes when the home is eventually sold.
• Potential Tax Reassessment: Depending on how title is held, adding a child could trigger a property tax reassessment, increasing taxes significantly.
• Gift Tax Implications: Transferring partial ownership may be considered a taxable gift by the IRS, requiring the parent to file a gift tax return and potentially pay taxes.

The Bigger Picture: Why Everyone Needs a Trust

For homeowners, having a properly structured trust can prevent a host of legal and financial issues, ensuring assets are transferred smoothly and cost-effectively. Here are some key reasons why setting up a trust is essential:

• Avoiding Probate: Without a trust, an estate typically goes through probate, a lengthy and expensive court process that can cost tens of thousands of dollars.
• Maintaining Control Over Assets: A trust allows the original owner to dictate exactly how and when assets are distributed to beneficiaries.
• Health Directives & Financial Power of Attorney: Trust documents can include medical and financial directives to ensure that someone trusted is making decisions if the owner becomes incapacitated.
• Privacy Protection: Unlike a will, which becomes a public record, a trust remains private, keeping personal financial matters confidential.
• Protection from Creditors & Legal Disputes: In some cases, trusts can help shield assets from lawsuits or creditors.

Conclusion

Real estate professionals should understand the importance of Trust Loans and trusts to guide their clients better. A Trust Loan preserves Proposition 13 tax benefits, while a well-structured trust keeps assets out of probate and ensures a smooth transfer of ownership. Educating homeowners on these topics can save them and their heirs significant time and money in the long run.

If you have questions about Trust Loans or anything to do with loans or money, please feel free to reach out!

Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

But wait, there’s more…

Interest Rates

We have had an excellent week plus in the bond market, and rates have been dropping nicely. We are still in the mid to high 6’s, on conventional loans with no points, but at least we are heading in the right direction! Government loans are in the high 5’s and low 6’s.

• We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans.
• We provide loans in all states, so call me with anything you need.
• Government Loans (FHA/VA/USDA) are in the 5’s and 6s.
• Conventional loans up to $806,500 are in the 6s.
• High Balance Loans from $806,501 to $1,209,750 are also in the 6’s.
• Jumbo loans above $1,209,750 are in the 6’s.
• Bank statement loans are available with 10% down again, with larger down payments in the 6’s.
• Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement!
• 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No Ratio Loans require 30% down.
• DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down.
• Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go!
• 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates!

Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.

**Good News for Condos:**   – NONE!

**Bad News for Condos:** Friendly Valley –  Fannie Mae now denies the entire Friendly complex for critical repairs and deferred maintenance.  Regardless of which of the 13 Friendly Valley Condos it is.

The full state of California naughty list has been added to MikeMeena.com! Over 700 condos that are naughty per Fannie and Freddie.  Just go there and click “about” to find our most updated non-warrantable condo list.

Let me know if you hear anything new about condos or townhouses.

I am available every day if you need anything.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow!