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A HELOC for a Living Trust?
by Lucy Griffin, BOL Guru
BIO AND CONTACT INFO
Question: Realizing that a Revocable Living Trust is not a natural person; and right to rescind doesn't apply, can the Trustee of the Trust apply for an equity line of credit for the Trust?
Answer: Unless state law speaks specifically to this, you can make a HELOC to a living trust. As you have noted, the living trust is not the consumer and therefore you aren't under Regulation Z. But, consider this position carefully. It is possible for a court, given the right fact situation, to find that the real borrowers were the consumers living in the house and that the trust was a legal fiction for estate planning purposes. For that reason, I suggest that is less risky to provide the right of rescission even though a strong argument can be made that it doesn't apply.
First published on BankersOnline.com 9/2/03
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