The concept behind a trust is fairly straightforward. It’s a legal arrangement in which one party, known as the trustor, gives a second party — the trustee — control of their property or their assets on behalf of a beneficiary. The trustor is also sometimes referred to as a “grantor;” the two terms meaning the same thing.

There are two kinds of trust: irrevocable, and revocable. A revocable trust, also known as a living trust, can be changed by the grantor at any time. In contrast, the terms of an irrevocable trust are fixed and cannot be altered once the trust is set up.
Although the basic idea of a trust is simple, some aspects of an irrevocable trust can be complex. If you have a question about setting up or administering an irrevocable trust, it’s a good idea to speak to an expert. You’ll find answers to some of the most common questions about California trust loans below.

Can a house with a mortgage be put in an irrevocable trust?

Yes. If you’re setting up an irrevocable trust, you can certainly transfer your mortgaged house to the trust. You are not required to pay off the mortgage before you transfer the property to the trust.

One benefit of putting property into a trust is that it protects the property from being claimed by Medicaid in the event that you die owing the agency money for your medical expenses. In that event, it is possible that Medicaid will force a sale of your property in order to pay for the reimbursement. This can be avoided by putting the property into an irrevocable trust.

Can a grantor borrow money from an irrevocable trust?

Technically, a grantor can set up the terms of an irrevocable trust in order to allow borrowing from funds held in the trust.

However, this is a very unusual set-up. Most of the time, grantors cannot borrow money from an irrevocable trust. If you are setting up a trust and anticipate that you may wish to borrow from it in the future, it may be a better choice to set up a revocable trust.

When you set up a revocable trust, you can change the terms of the trust whenever you wish. In the event that you want to borrow money against it, you just alter the terms of the agreement to reflect that decision.

Can an irrevocable trust get a mortgage?

It can be done, but it is a complex process. Most traditional lenders are hesitant to give mortgages, or other forms of loans, to irrevocable trusts.

However, some private lenders, like HCS Equity, are willing and able to offer trust loans directly to irrevocable trusts. When you take out a trust loan, you use assets held in the trust as collateral.

In order to do this, the trust will need to be set up so that trustees may use trust property as collateral to secure the loan.

Can a trust borrow money from a bank?

Most of the time, a trust can borrow money from a bank. However, it is a more straightforward process to borrow money from a bank when using a revocable trust.

If you have an irrevocable trust, it is still possible to take out a loan. An irrevocable trust cannot guarantee the loan. However, if it is set up correctly, an irrevocable trust can secure a loan with the property or other assets that are held in the trust. 

Most of the time banks and other traditional lenders are reluctant to lend money against an irrevocable trust. Specialized lenders like HCS Equity have the experience to make loans to irrevocable trusts.

Can a trustee borrow money from a trust?

Technically, a grantor (also known as a trustor) can set up the terms of an irrevocable trust in order to allow the trustee to borrow from funds held in the trust.

When you set up a revocable trust, you can change the terms of the trust whenever you wish. In the event that the trustee later wants to borrow money against it, you just alter the terms of the agreement to reflect that decision.

If you have an irrevocable trust, then a non-traditional, specialty lender like HCS Equity can work with you to help you get a loan.

Can a trust take out a loan?

Yes. A trust can take out a loan. However, many traditional lenders are not set up to issue loans to irrevocable trusts. If you have an irrevocable trust and wish to take out a loan, you will likely be better off working with a specialized lender like HCS Equity.