Using Trust Funds To Purchase A Home in Virginia

As interest rates rise, more children of high-net-worth families are likely to tap into their trust funds to buy a home.

Buying a home means chaining yourself to a mortgage and the financial institution holding it. This
arrangement is oftentimes considered a necessary evil of adulthood. But then again, when there are
Interest rates rise trust funds available to help, buying a home might not be such a necessary evil at all.

Under the right circumstances, trusts may be tapped to assist you and your loved ones, even when it comes to bypassing the bankers and buying a home. This is more and more useful as interest rates

Whether you are the beneficiary of a trust or just out to settle one, you will want to read a recent article in The Wall Street Journal titled “Tapping the Trusty Trust Fund to Buy a House.

Essentially, a trust can operate in much the same manner as a bank, but without much of the onerous rates, rules, liens and stress. As a trust beneficiary, you can approach the trust for a “mortgage” in the form of a loan from the trust and the trustee can even grant the loan at little or no interest. Sometimes, you can even ask for a full distribution from the trust to finance the whole transaction.

In any event, your access to the trust funds is up to the trustee as guided by the rules of the trust itself.  You see, some trusts are not designed to permit this for a variety of reasons, some known only to the person who established the trust. In addition, the  trustee may have the interests of other trust beneficiaries to consider.  Nevertheless, if there are no such limitations, then having access to trust
funds can be a great blessing.

Depending on the language of the trust and your unique circumstance, the trust itself may be engineered specifically to own the house. Properly structured, ownership by the trust can provide important asset protection from potential divorces, lawsuits and bankruptcies. Alternatively, Qualified Personal Residence Trusts (QPRTs) and Intentionally Defective Grantor Trusts (IDGTs) can be extremely valuable in this regard, even though normally we talk about them in the context of
transferring the family home.

If you are ready to create a trust for your beneficiaries, or perhaps are looking for creative ways to help your loved ones buy their first home, these are some options to explore.

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia.  Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. 

Reference: The Wall Street Journal (September 19, 2013) “Tapping the Trusty Trust Fund to Buy a House

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Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.