My married mother owned her home alone after Dad signed a quit claim when they were separated years ago. She set up a revocable trust 10 years ago leaving a life estate for Dad upon her death. She just passed away, so now we have an irrevocable trust. Can my Dad get a line of credit to do necessary repairs to the property as she left no cash to him nor does he have any of his own for these repairs. His income would support the modest payments and he can cover the regular expenses, just not the major repairs that are needed. Banks are telling us they cannot loan anything to him as he does not really "own" the property (and yes, we told them he has a life estate), and they don't loan on homes owned in irrevocable trusts. My sister, the successor trustee, refuses to apply in her own name, and I can't say that I blame her. Ideas?
3 Answers from Attorneys
I don't know if any lender would go along with it, but in order to get a line of credit on this property, the only possibility I can think of would be for the life tenant and all remaindermen to apply together (and sign the deed of trust.) If it is really a life estate and not a life interest in trust, the "successor trustee" is not relevant.
Lenders will generally not lend based on a life estate. After all, if your father dies tomorrow there is no security for the loan. I agree with Michele that if improvements are needed, a cooperative lender may lend if all owners (of both the life estate and the remainder interests) agree to encumber the property. You will likely need a specialized lender to do this and a demonstrable source of repayment. This gratuitous response does not create an attorney client relationship. The advice provided herein is generic, may not apply to your circumstances and is not to be relied upon in your actions. An attorney client relationship is created only upon execution of an engagement letter hiring me or my firm.
This is not a lender forum. Ask a lender what is needed to get a loan under your circumstances.