California Trust Loan Guide

Real estate held in a trust is a cornerstone of California wealth management; it’s primarily used for estate planning, asset protection, and the critical goal of avoiding probate.

As a result, California trust loans have emerged as a vital financing tool for beneficiaries and trustees who need to access cash without selling a property.

One of the most frequently asked questions by beneficiaries and trustees in California is: 

Is it possible to borrow money from a trust?

The short answer is YES, but only if certain conditions are met.

The ability to borrow depends on the type of trust, the beneficiary’s rights, and the lender’s requirements.

In this guide, we breakdown how trust loans work in California, when borrowing is possible, and what options beneficiaries may have.

• Grantor: The person who created and funded the trust.
• Trustee: The "manager" of the trust who has the fiduciary duty to handle assets and sign any loan documents.
• Beneficiary: The person who financially benefits from the trust. 

Even if you are the sole beneficiary and the "intended" owner of a property, you do not hold any rights to borrow without the trustee signing off.

In California, borrowing against a Revocable Living Trust is common and typically the easiest to execute. 

If the trust document authorizes borrowing or even if the trust language is silent on the matter of borrowing, a beneficiary can almost always access funds.

The trustee, not the beneficiary, is the person who actually has the authority to sign for the loan.

The loan is technically made to the trust, not the beneficiary.  

General Rules of Thumb:

• When it's easiest: Borrowing is easiest when the Grantor, Trustee, and Beneficiary are all the same person (common in living trusts).
• Silence is Consent: If a revocable trust is "silent" (doesn't mention borrowing), California law generally grants the trustee broad powers to allow borrowing against a property held in the trust.
• Hard No: If the trust explicitly prohibits debt, borrowing is not possible under any circumstances.
• No Hard to Other Beneficiaries: Any borrowing must not create a detrimental financial impact for any of the other beneficiaries.

Private money lenders are often the most flexible financing option for trust-held properties, since they primarily focus on collateral value and trustee authority, not borrower income or credit scores.

Why would a trustee or beneficiary seek this type of financing?

1. Buy-out Other Beneficiaries: One of the most common examples is if three siblings inherit a home but only one wants to keep it, the trust takes out a loan to pay-out the other two siblings' shares.
2. Property Maintenance: Borrowing to fund major repairs on a property to increase its value before selling.
3. Bridge to Distribution: Providing immediate cash to beneficiaries while waiting for a property to sell or for the probate process to conclude.

In addition to preserving the family home, this approach may offer significant tax advantages, including inheriting the current property tax and a stepped-up cost basis at the time of inheritance. 

For more information regarding these tax benefits, see this article for a more in-depth look.

Finding a California trust loan lender is a different process than obtaining a conventional home mortgage. 

Since traditional banks often struggle with the legal complexity of trust loans, you will likely need to look for alternative financing from a private money lender.

For more information checkout our full guide How To Find The Best Hard Money Lender in California.