Can You Borrow Against a Trust?

1. Can You Borrow Against a Trust?

Yes, and the rule depends on which seat you hold in the trust.

• The grantor of a revocable trust can borrow against the trust’s property much as an owner would. A revocable trust is the grantor’s own property for most purposes, and while it can be revoked the trustee answers only to the grantor. Our page on who owns the property in a revocable trust explains why.
• The trustee of any Florida trust has a default power to borrow money, with or without security, and to mortgage or pledge trust property, for a term that may run past the end of the trust. The list of specific trustee powers includes it, and a trust can narrow or remove it.
• A beneficiary usually cannot pledge a future share of a trust, because most Florida trusts contain a spendthrift clause. The trustee may lend to the beneficiary instead.

In every case the borrower on paper is the trustee, signing as trustee, because the trustee holds title to the trust’s property. The trustee’s role and the grantor’s role, covered on our page on who the grantor of a trust is, are often the same person in a living trust.

2. Can You Get a Mortgage on a House in a Revocable Trust?

Yes. Fannie Mae, which buys a large share of American home loans, accepts a mortgage to an inter vivos revocable trust, meaning a living trust the owner created during life and can change or cancel. Its Selling Guide sets conditions that most Florida living trusts already meet.

• The primary beneficiary must be the person or people who created the trust.
• The trustees must include the person who created the trust, or at least one of them where two people created it, or an institutional trustee.
• For a principal residence, at least one person who created the trust must live in the home.
• The title insurer must insure the loan without an exception for the trust or the trustees.
• The trustee signs the mortgage, and the person who created the trust also signs the loan documents for a principal residence.

The last signature is the one owners do not expect. You sign twice, once as trustee and once as yourself. Freddie Mac publishes its own rules, and a lender whose loans do not go to either agency may set stricter ones, including asking that the house be deeded out of the trust and back in after closing. Ask the lender for its trust requirements before the application, not at closing.

A loan you already have is protected when the house moves into the trust. Federal law bars a lender from calling a home loan due because of a transfer into a living trust in which the borrower is and remains a beneficiary, as long as the transfer does not hand occupancy of the home to someone else. Our guides on putting your house in a trust and on the Florida homestead held in a revocable trust cover the deed, and our page on the lady bird deed with a mortgage covers the alternative.

3. Can an Irrevocable Trust Take Out a Loan?

Yes. The trustee’s power to borrow and mortgage applies to irrevocable trusts too, unless the trust document limits it. A trustee of a family trust might borrow against a rental building to replace its roof, or take a short loan to pay estate tax without selling property at a bad price.

The duties decide whether a particular loan is a good one. An irrevocable trustee answers to the beneficiaries, must manage the property as a prudent person would with reasonable care, skill and caution, and must treat an income beneficiary and the remainder beneficiaries fairly when a loan helps one at the other’s expense. A mortgage that funds a distribution to one child and leaves the others with a smaller, encumbered trust is the kind of loan that draws a challenge. Our pages on prudent administration and on the duty of impartiality cover both duties.

A lender does not have to read the whole trust. The trustee gives it a certification of trust, a short statement naming the trustee and the trustee’s powers, and Florida protects a lender who relies on it in good faith.

4. Can a Beneficiary Borrow Against a Trust Fund?

Not in the way most people mean. A beneficiary of a trust with a spendthrift clause may not transfer the beneficiary’s interest, and a creditor or assignee of the beneficiary cannot reach the interest or a distribution before the beneficiary receives it. Florida makes the clause easy to include, since a trust stating that an interest is held subject to a spendthrift trust is enough. A bank cannot take an inheritance still sitting in such a trust as collateral, and a company offering an advance on a trust share is buying something the clause says cannot be sold. Our page on whether a spendthrift clause is valid explains the rule.

The trustee can lend instead. Florida’s trust code lets a trustee make loans out of trust property, including loans to a beneficiary on terms that are fair and reasonable under the circumstances, and gives the trustee a lien on the beneficiary’s future distributions for repayment. A son who needs $40,000 for a down payment and is due a larger share when his mother’s trust ends can ask the trustee for a loan, and the trustee can recover it from his share if he does not repay. Our guide to Florida trust beneficiary rights covers what a beneficiary may ask for.

5. Can the Trustee Borrow From the Trust?

Not safely. A Florida trustee must administer the trust solely in the beneficiaries’ interests. A loan or other transaction between the trust and the trustee personally is voidable by an affected beneficiary unless the trust authorized it, a court approved it, the beneficiary consented, or the grantor consented in writing while the trust was revocable. A transaction with the trustee’s spouse, children, siblings or parents is presumed to be affected by a conflict. Our page on the duty of loyalty lists the exceptions, and our page on what a trustee cannot do in Florida covers the rest.

A grantor who borrows from an irrevocable trust faces a tax rule as well. Under section 675 of the Internal Revenue Code, a grantor who borrows trust money and has not repaid it before the tax year begins is treated as the owner of the trust for income tax purposes, unless the loan carries adequate interest and adequate security and is made by an independent trustee. Our page on what a grantor trust is covers that rule.

What Does It Cost to Get the Trust Ready for a Loan?

A revocable trust drafted on its own is a flat fee from $2,400, and $3,200 for a couple, and it includes a borrowing power written to satisfy lenders. A deed moving a property into an existing trust is a flat fee from $550. A certification of trust for a pending loan, or a review of a trust’s power to borrow, is part of trust administration, a flat fee quoted at consult. Recording and other government costs are additional and passed through at cost. Advertised fees are honored for 90 days from the posted date. A beneficiary’s challenge to a trustee’s loan is litigation, which we quote per matter rather than as a flat fee.

Frequently Asked Questions

Common Situations

The retiree who wants to refinance. A widow’s house sits in her living trust and she wants a lower rate. The lender asks for a certification of trust, she signs the new mortgage as trustee and again as herself, and the house never leaves the trust.

The grandson who needs a car. A grandson is due a share of his grandmother’s trust at 30 and needs $15,000 now. The trustee lends it at a stated interest rate with a written note, records the loan in the trust’s books, and holds a lien on his future distribution in case he does not repay.

Sources of Law

• Fla. Stat. §736.0816(6) (trustee may borrow money with or without security and mortgage or pledge trust property); §736.0816(19) (loans to a beneficiary on fair and reasonable terms, with a lien on future distributions).
• Fla. Stat. §736.0502(1)-(3) (spendthrift provision; beneficiary may not transfer; creditors and assignees cannot reach undistributed interests); §736.0505 (annotated)(1)(a) (revocable trust property reachable by the settlor’s creditors); §736.0603 (annotated)(1) (duties owed to the settlor while revocable).
• Fla. Stat. §736.0802(1),(2),(3)(a) (duty of loyalty; transactions with the trustee voidable; family transactions presumed conflicted); §736.0803 (impartiality); §736.0804 (prudent administration); §736.1017 (annotated)(1),(6)-(7) (certification of trust; reliance protected).
• 12 U.S.C. §1701j-3(d)(8) (no due-on-sale enforcement on a transfer into an inter vivos trust in which the borrower is and remains a beneficiary). 26 U.S.C. §675(3) (grantor who borrows trust funds treated as owner).
• Fannie Mae Selling Guide B2-2-05, Inter Vivos Revocable Trusts. Retrieved September 30, 2026.
• Case retold below: Corcoran v. Federal Land Bank of Columbia, 478 So. 2d 1161 (Fla. 1st DCA 1985). Opinion read in full; retrieved September 30, 2026.

The Bank That Lent Money to Its Own Trust Department

The calls I take about trust borrowing almost always start with a mortgage the beneficiaries never saw, and a Florida case from 1985 shows how far that can go.

A woman created a trust holding land, with a bank in Dothan, Alabama as trustee, and her family as beneficiaries. The land carried a first mortgage to a federal farm lender. The bank, acting as trustee, also signed a note secured by a second mortgage on the trust’s land, and the lender on that second mortgage was the same bank, through its commercial side. The first lender foreclosed. At the sale the bank was the highest bidder at $564,000, and title to the trust’s land went to the bank. The bank then asked the court to fix what its trust department owed its lending department on the second mortgage, and the court entered a judgment of $674,101.61 including attorney’s fees. The trial judge described it as a matter between two departments of one bank. The family had already sued the bank in federal court for breaching its duties as trustee, and when they raised the same claims in the foreclosure, the state court dismissed them.

The First District held that the state court should have paused the family’s claims to wait for the federal case rather than dismissing them. One judge would have gone further, reasoning that the beneficiaries had to be parties to any foreclosure of their own trust’s land and that their breach claims went to the heart of the bank’s right to foreclose.

My reading of that case is that the decisive day was the day the trustee borrowed from its own lending side, years before anyone argued about it in court. In reviewing Florida cases where a trustee borrowed against trust property, I have a few take-home points.

The first is that the power to borrow is real and broad. Florida’s trust code gives it to every trustee by default. An owner who wants limits, such as no mortgage on the family home or no loan above a set amount without the beneficiaries’ consent, has to write them into the trust.

The second is the lender’s identity. A loan from the trustee’s own lending side is the conflicted transaction Florida now makes voidable by a beneficiary. Avoid naming a corporate trustee without a clause requiring outside approval for any loan from the trustee or its affiliates.

The third is notice. A beneficiary who learns of a mortgage only at the foreclosure sale is arguing about money that is already gone. A trust can require the trustee to notify the beneficiaries before encumbering real estate.

Every trust I prepare, flat fee from $2,400, states what the trustee may borrow and from whom. One limit is worth stating plainly. The opinion does not say why the trustee borrowed or how the family’s federal case ended, so it does not tell us whether they recovered anything.

Kevin D. Klagge, Esq., admitted in Florida since 2012. The case described above is a decision of a Florida court rather than a matter handled by this firm. Past results do not guarantee a similar outcome.

Updated on September 30, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. General information about Florida law, not legal advice, and no attorney-client relationship is created. Do not send confidential information until we have agreed to represent you.