Borrowing as a successor trustee: documents and authority
By Francisco Williams, CCIM · CCIM · CalDRE #01979442 · NMLS #1858674 · Updated
Short answer
When property is held in a living trust, the successor trustee usually manages it without probate, under the powers in the trust instrument. To borrow against trust property, the trust must grant that power, and the trustee typically provides a certification of trust, a recorded affidavit of the prior trustee's death, and a title report.
Start with the trust's powers
Most modern California trusts give the trustee broad power to sell, lease and encumber real property, but not all do, and some require co-trustees to act together. Read the powers section with the trust's attorney before talking to a lender.
The documents
Title companies and lenders work from a standard set. The checklist covers the usual items.
- Certification of trust (Prob. Code §18100.5)
- Recorded affidavit of death of trustee, with certified death certificate
- Trust pages showing successor appointment and power to encumber
- Co-trustee consents, if more than one trustee
- Preliminary title report showing title in the trust
- Property insurance in the trust's name
- Written use of funds and repayment plan (sale or refinance)
- Beneficiary notice status (Prob. Code §16061.7)
Typical items; title and the lender may ask for more.
Certification instead of the whole trust
Probate Code §18100.5 lets a trustee give a certification of trust with the key facts (the trust exists, who the trustees are, their powers) instead of the full document. Title may still ask for excerpts, such as the trustee-succession and powers pages.
Duties that come with the power
A trustee owes duties to the beneficiaries: to act prudently, impartially and with notice. Borrowing to repair a property before sale, or to fund a beneficiary buyout, can be appropriate, but the trustee should document why. Beneficiaries generally must receive notice under Probate Code §16061.7 after a trust becomes irrevocable.
Next step
Fiduciaries and their attorneys can review CDF's fiduciary resources page.
Frequently asked questions
Does a successor trustee need court approval to borrow?
Usually not, if the trust grants the power. Court involvement is the exception, such as a dispute or unclear terms.
What is a certification of trust?
A short signed statement of the trust's key facts under Probate Code §18100.5, used instead of the full trust.
Can trust property be refinanced to buy out a beneficiary?
Sometimes, if the trust allows it and the trustee meets their duties. Confirm with the trust's attorney.
Sources
Selling or holding a California probate property when the estate needs cash first
How IAEA authority, court confirmation and estate cash needs shape the financing options for a California probate property.
Buying out a sibling's share of an inherited California property
One heir wants to keep the house, another wants cash. How a buyout is sized, who signs, and when a loan is business-purpose or consumer.