With interest rates on the rise and the jumbo mortgage process becoming increasingly more difficult, more children of high-net-worth families are turning to their trust funds to purchase a home.
A recent Wall Street Journal article, Tapping the Trusty Trust Fund to Buy a House, discusses this current trend, noting that tapping into a trust is often easier than taking out a loan.
“The loan-application process for borrowing from a trust is much simpler and faster than applying for a mortgage, especially a jumbo with its tight qualification standards for credit score, income and reserves,” said Randy Carver, an investment advisor and principal mentor at Carver Financial Services Inc.
In addition to borrowing from a trust, a buyer may consider having the trust purchase and own the house because of the tax advantages. Adam von Poblitz, head of estate planning for Citi Private Bank North America, tells the WSJ that trust money is tax-exempt if put towards a home investment. Von Poblitz also says that a house under a trust yields lower risk when it comes to legal action because creditors usually cannot come after it.
The article goes onto explain which trusts many be good options for families planning to take this route. To learn more about these trusts, read the article here and talk to your financial advisor.
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