If I’m the beneficiary to a family trust, am I allowed to borrow money from a lender using my portion of the assets in the trust as collateral?

Get Legal Help Today

 Secured with SHA-256 Encryption

If I’m the beneficiary to a family trust, am I allowed to borrow money from a lender using my portion of the assets in the trust as collateral?

The family trust will be established in CA. The settlors are still living.

Asked on August 7, 2011 California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

To answer your question, you need to read the provisions of the family trust carefully to see if there is an express prohibition against securing your interests in the family trust as the trust's beneficiary for a loan. If the trust precludes what you want to do, then you cannot obtain a third party loan using your interest in the family trust as one of its benficiaries as collateral for the loan.

If there is no prohibition for such in the trust, you should still advise the trustee of you desires and obtain written permission before proceeding. A problem is that the lender will want to see the provisions of the trust before any loan is made. Beneficiaries under the trust as well as the trustee may not like the idea of a copy of the trust being provided to any lender.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption