Loan to an Estate

Posted By: TaraTLR

Loan to an Estate - 06/07/21 03:57 PM

I could really use some help with this. We have a customer who applied for an Unsecured Line of Credit. The loan is to the estate. This is not a trust. The personal representative is the person signing on behalf of the estate. If the loan is for consumer purpose, would it fall under Reg. Z? I know there is language in Reg. Z for Trust loans, but not loans to an estate. Would the estate be exempt as an entity like LLC's, Corporations, etc? Thank you in advance for your help.
Posted By: rlcarey

Re: Loan to an Estate - 06/07/21 04:02 PM

Estates are not addressed in Regulation Z and I would say it is exempt. But an estate borrowing on a unsecured basis and for a line of credit is highly unusual and I have never actually ever heard of such a need. Has this transaction been vetted by your legal counsel?
Posted By: TaraTLR

Re: Loan to an Estate - 06/07/21 04:10 PM

I did actually just find out that it will be secured by a wealth management account. I also found out that it is to refinance the loan from the individual that passed away to their estate. It was previously a consumer purpose loan to the individual. I honestly don't know if it has been vetted by our legal counsel. I would assume it has, only because it has been approved by our Board. In your opinion, would this be considered a non-natural person now that it is being refinanced into the name of the estate and should be a commercial loan and not a consumer loan? Sorry for not having all of the information beforehand.
Posted By: rlcarey

Re: Loan to an Estate - 06/07/21 04:12 PM

An estate is not a natural person. How you categorize a loan internally is a business decision, but it would not fall under the Regulation Z open end rules.
Posted By: TaraTLR

Re: Loan to an Estate - 06/07/21 04:25 PM

Thank you.