What is an irrevocable trust loan?
An irrevocable trust loan is financing made directly to a trust — rather than to an individual — allowing a trustee or beneficiary to access funds secured by real property the trust holds. These loans are commonly used to buy out co-beneficiaries, cover estate expenses, pay off existing liens, or provide liquidity while trust assets are illiquid or tied up in real estate.
How It Works
- The trust is the borrower of record, with the property held in trust serving as collateral.
- The trustee, acting on behalf of the beneficiaries, applies and signs for the loan under the authority granted in the trust document.
- Funds are disbursed for beneficiary buyouts, debt payoff, property repairs, or estate-related expenses.
- Repayment or refinance typically occurs once the trust is settled or the property transfers to an individual beneficiary’s name.
Who Uses This Loan
- Trustees needing liquidity without selling trust-held real estate
- Beneficiaries who want to retain inherited property but must pay out others
- Families resolving disputes over trust assets where cash, not the property itself, solves the conflict
- Trusts holding property with existing liens that must be cleared before distribution