Sibling Buy-Outs on Trust Property
HCS Equity is a trust loan lender in the state of California specializing in sibling buy-outs of trust property.
HCS Equity has assisted hundreds of trustees and administrators with specialized financing to solve their short-term capital needs. Most commonly, a trust or estate in probate will borrow funds to facilitate the non pro-rata equalization and distribution of assets between beneficiaries under Proposition 19/58 (the parent-child exclusion from reassessment) in accordance with the State Board of Equalization’s guidelines. When executed correctly, this allows for the transfer of real property from a trust or estate in probate to a child without having the property taxes reassessed.
Obtaining a trust or estate loan at competitive rates and with a quick turnaround is possible with HCS Equity.
Contact us today to get started on your trust or estate loan.
Ensuring a Smooth Transfer of Assets from One Generation to the Next
We work closely with trustees/administrators and their attorneys to comply with State Board of Equalization tax regulations. We use our own capital as a private lender, provide swift review and approval, offer flexible underwriting and terms, and do not implement any prepayment penalties or minimum months of interest. Additionally, we provide availability of funds within 7-10 days in most cases.
In order to take advantage of property tax exclusions and avoid potential issues caused by cash-poor estates or beneficiaries’ needs, trustees and executors should consider HCS Equity a valuable resource in ensuring a smooth transfer of assets from one generation to the next.
In addition to matters relating to the parent-child exclusion from reassessment, HCS Equity also works with trustees and administrators (who have the appropriate legal authority) to provide funds needed for the following situations:
- Capital to cover existing debt service, property maintenance, paying property taxes and insurance
- Funds can be used to pay funeral expenses, lingering medical bills
- Funds to pay legal expenses during the lengthy trust administration or probate process
- To reimburse family members and administrators that have used their own capital as part of the administration process
- Pay legal and relocation expenses to evict tenants
- Rehab and update property prior to sale to maximize return to estate
Additional Benefits of Securing your Trust or Estate Loan
with HCS Equity, Include
- Competitive interest rates and terms
- No personal guarantee or down payment required
- Interest-only payments
- No prepay penalties
- No minimum months of interest
- Funds are typically available within 7-10 business days
Trust and Estate Loan Process
STEP 1: Determine who will retain property
Oftentimes one or more beneficiary wishes to retain the property and it’s tax base.
STEP 2 : Determine loan amount
The property value, other assets/cash in the trust or estate, and the number of beneficiaries are used to determine the liquidity needs for equalization.
STEP 3 : HCS Equity provides a loan
HCS Equity provides private capital directly to the trust or estate to create the liquidity needed for equalization, a necessary step to avoid reassessment under Proposition 19/58.
STEP 4 : Equalization and distribution
Cash and property are distributed as mutually agreed upon by the beneficiaries.
STEP 5 : Change of ownership
Change of ownership and exclusion from reassessment are filed.
STEP 6 : Private loan is repaid
The beneficiary retaining the property either repays the private loan with their own funds, or secures conventional financing to repay the private loan.
*This is for illustrative purposes only, HCS Equity does not provide legal advice or services
FAQ
No, Legislation is clear that Proposition 58 applies to transfers that occurred on or before February 15, 2021, and that Proposition 19 applies to transfers that have or will occur on or after February 16, 2021.
Our understanding is that at least one eligible transferee must plan to continually live in the property as his or her family home for the property to maintain the exclusion. Once the property is no longer your family home, it will receive a new taxable value. The new taxable value will be the assessed market value of the home on the date you inherited it and adjusted each year accordingly.
It appears that the current intent of the Legislature is to allow the exclusion as long as the parent’s family home becomes the family home of at least one of the children.
No, Proposition 19 limits the parent-child exclusion to a transfer of a family home that is the principal residence of the transferor and becomes the principal residence of the transferee.
As long as the date of transfer or change in ownership of real property between parent and child occurred on or before February 15, 2021, the transfer will qualify for the exclusion under Proposition 58/193. The date of death is the date of the change in ownership. The claim must be filed with the County Assessor within three years of the date of transfer or before a transfer to a third party or within six months of the date of notice of supplemental or escape assessment. Therefore, the claim does not need to be filed by February 16, 2021.
The value limit under Proposition 19 is the sum of the factored base year value plus $1 million. If the market value exceeds this limit, partial relief is available. The amount exceeding the excluded amount will be added to the factored base year value.
The law in effect is that the date of death will apply. Proposition 19 is clear that Proposition 58 applies to transfers that occur on or before February 15, 2021, and Proposition 19 applies to transfers that occur on or after February 16, 2021.
No. As long as the date of transfer is on or before February 15, 2021, the transfer will qualify for the Proposition 58/193 exclusion. Property Tax Rule 462.260 makes clear that the recordation date of a deed is rebuttably presumed to be the transfer date. This means that if evidence is shown that the transfer occurred prior to the recordation date, the assessor should accept that earlier date. Such evidence could be, for example, the date of a notarized document of transfer, such as a deed.
The administration of a trust is governed by the trust instrument itself. For properties held in trusts, Revenue and Taxation Code section 61(h) states that a change in ownership occurs when any interests in real property vest in persons other than the trustor or the trustor’s spouse or registered domestic partner when a revocable trust becomes irrevocable. This typically occurs upon the death of the trustor. The date of death is considered to be the date of change in ownership. Proposition 19 is clear that Proposition 58 applies to transfers that occur on or before February 15, 2021, and Proposition 19 applies to transfers that occur on or after February 16, 2021.
To apply for the homeowners’ exemption or disabled veterans’ exemption, a claim must be filed with the County Assessor.
If you have further questions, you may call one of our experts at HCS Equity at 877-427-9820.
Proposition 19, which went into effect February 16th of 2021, replaced Proposition 58, and created a far more narrow property tax exclusion for inherited properties. Contact us to learn more about Proposition 19 and whether it affects you.
No, the loan can be repaid anytime without any minimum interest amount due.
The typical term is one year, but we can provide longer terms depending on the situation.
No, we can lend to a trust or estate regardless of occupancy of the property.
HCS will secure the loan against almost any type of real property located within CA.
We can lend from $30,000 to $3,000,000.
No, we will not ask the administrator to provide their personal financial information, nor will we ask for their social security number, income, assets, etc. We provide the loan under the EIN or tax ID number of the trust or estate, and the trustee or administrator will only be signing in the capacity of trustee or administrator with no personal guarantee or liability.
Understanding Probate Loans in California: Your Guide to Estate Financing
In California, the probate process often creates significant delays in accessing estate assets. While probate court ensures a fair distribution of property and oversight of legal obligations, the lengthy probate process can leave administrators without immediate access to funds.
Probate loans in California provide a solution by offering estate administrators short term financing secured against the estate’s real estate. These estate loan products are specifically designed to provide liquidity for paying property taxes, covering mortgage payments, addressing funeral costs, or managing attorney fees and other legal expenses tied to the probate estate.
Hard money lenders and private lenders play a central role in probate lending across California, offering probate loans with competitive rates and flexible structures tailored to the estate’s real estate value. Leveraging sufficient equity in the inherited property means that administrators can borrow funds quickly without needing to wait for the final distribution of assets from the probate court.
How Probate Loans Work in the Probate Process
A probate loan is a financial tool that allows a probate administrator to access funds. Unlike a probate advance or inheritance advances, which involves the sale of rights to a portion of the inheritance, an estate loan is structured as short term financing secured by estate owned real estate.
The legal process requires court oversight, but once the probate administrator with legal authority approves the arrangement, the lender disburses funds. The probate loan is then repaid when the probate property is sold, refinanced, or formally transferred to the beneficiaries involved.
Uses of Probate Loans in California
Probate loans in California are often used to stabilize an estate’s financial situation. Funds can be applied toward paying property taxes to avoid penalties or a property tax reassessment that might otherwise occur during a property transfer. Mortgage payments can also be kept current to maintain ownership of the estate’s real estate.
Estate loans are commonly utilized to pay attorney fees, legal fees, and other outstanding debts tied to the estate. Administrators may also use funds for funeral costs, cover legal and administrative fees, or to buy out other heirs in cases where multiple heirs or family members are involved in the probate case.
Because probate loans are secured by the estate’s real property, they provide administrators with access funds quickly even if the estate itself cannot yet be liquidated. This helps avoid distressed sales of assets and ensures that inherited property is preserved until it can be transferred under California law.
Probate Loan Interest Rates and Terms
Probate loan interest rates in California reflect the short term nature of the financing and the risk profile of the estate’s real estate. Unlike traditional mortgage products, credit checks or income verification may not be central to approval, as sufficient equity in the probate property is the primary underwriting metric.
Many probate lenders structure loans with interest only payments and no prepayment penalties, allowing early repayment once the property sale is complete, or probate is closed out. While interest rates are typically higher than conventional bank loans, the trade-off is fast funding, competitive rates, and the ability to resolve urgent financial needs during the probate process.
Probate Lending and Property Tax Reassessment
California’s property tax framework, administered by the California Board of Equalization and local county assessors, often subjects inherited property to tax reassessment. Probate loans California can be used to facilitate a timely property transfer that preserves lower property taxes under Proposition 19, provided that all the heirs meet statutory requirements.
Beneficiaries can preserve the estate’s real estate and ensure compliance with California law on tax reassessment by using an estate loan to maintain payments or resolve outstanding debts. Consulting with a tax professional during this stage is essential to minimize tax liabilities and confirm eligibility for exclusions.
Probate Loans for Inherited Property with Multiple Heirs
When multiple heirs or family members are involved, the probate case often requires creative financing solutions. Probate loans can provide administrators with enough cash to buy out other heirs, distribute funds equitably, or manage conflicting financial situations. For example, one heir may wish to maintain ownership of an inherited home in San Diego while other heirs prefer to liquidate their interest. In such cases, an estate loan can provide the capital required to satisfy all the heirs and finalize the property transfer through probate court.
Probate lenders in California frequently structure short term probate loan packages that account for these specific circumstances. In some cases, cross-collateralization with other real estate assets may be possible, ensuring access to larger loan amounts.
Probate Loans and Credit Considerations
Because probate loans are asset-based, even administrators with bad credit or unique financial situations may qualify. Private money lenders and hard money lenders focus primarily on property value and sufficient equity rather than traditional underwriting metrics. This makes probate lending accessible for administrators who would otherwise struggle to borrow funds through conventional banks.
Probate loans California may also be structured to allow early repayment without penalty, ensuring that once the estate’s real estate is sold, the loan is closed without added costs. This feature is especially valuable in cases where a property sells faster than anticipated or when refinancing becomes an option.
The Role of Private Lenders in Probate Financing
Private lenders specializing in probate lending provide probate administrators with a level of flexibility not available through institutional channels. Probate lenders in California understand the nuances of the legal process and the specific requirements of probate court. They can deliver fast funding, often within days, once legal authority is established and the estate’s assets are verified.
HCS Equity operates as a direct probate lender, offering short term financing solutions tailored to probate estate needs. With over 20 years of experience in California real estate, HCS Equity provides excellent customer service and great customer service to administrators navigating probate property complexities. Whether dealing with an inherited home, probate property in San Diego, or a complex estate with multiple heirs, we structure competitive rates and fast funding solutions designed for specific circumstances.
Conclusion
Probate loans in California provide an essential bridge between the legal process of probate and the immediate financial needs of administrators. From paying property taxes and attorney fees to resolving outstanding debts and preserving inherited property, an estate loan allows administrators to access funds quickly while the probate case moves forward.
If you are a probate administrator, working with private money probate lenders ensures access to short term financing that fits California’s legal and financial landscape. With competitive rates, interest only terms, and no prepayment penalties, probate loans remain a critical tool for heirs who need financial assistance during a lengthy process.
At HCS Equity, our focus is on providing administrators with timely, transparent, and professional probate lending solutions. Contact us today for a free consultation and discover how we can help you maintain ownership of estate’s real estate, resolve debts, and access funds during probate.
Frequently Asked Questions
1. How does a probate loan affect property tax reassessment in California?
A probate loan can help facilitate timely property transfers that may qualify for Proposition 19 exclusions, preventing a full tax reassessment and maintaining lower property taxes.
2. Are probate loan interest rates tax deductible for beneficiaries?
In some cases, interest payments may be deductible if the loan directly relates to estate administration or investment property. Consultation with a tax professional is necessary for confirmation.
3. Can probate loans be used to cover litigation or contested probate expenses?
Yes, probate loans may provide financial assistance for legal fees and attorney fees arising from disputes between heirs or challenges within probate court.
4. What happens if the property value declines during the probate process?
If property value decreases significantly, lenders may require additional collateral or early repayment. However, most probate loans are structured conservatively to account for market changes.
5. Can administrators with bad credit still qualify for probate loans?
Yes, because probate loans are secured against the estate’s real estate, credit checks are less significant. Administrators with bad credit or limited financial history may still borrow funds if sufficient equity exists.
