Can I Get a Reverse Mortgage If My Home Is in a Trust? (w/Examples) + FAQs

Yes, you absolutely can get a reverse mortgage if your home is in a trust, and you can also place a home that already has a reverse mortgage into a new trust. However, this process is governed by a strict set of federal rules that must be followed perfectly.

The core problem arises from a direct legal conflict. A lender needs a clear, undisputed lien on your property to secure their loan, but a living trust changes the legal owner of your home from you to the trust entity. This conflict is governed by the U.S. Department of Housing and Urban Development (HUD) in a rulebook called HUD Handbook 4235.1. If a trust does not meet HUD’s exact specifications, the lender will deny the loan; if you transfer the property into a non-compliant trust after getting the loan, the lender can demand immediate, full repayment, potentially forcing a foreclosure.

This is not a niche issue; homeowners aged 62 and older hold over $13 trillion in home equity, a significant portion of which is held in trusts for estate planning. Understanding how to correctly navigate these two powerful financial tools is critical.

Here is what you will learn, step-by-step, to solve this complex puzzle:

✅ The Core Conflict Explained: Understand the fundamental clash between a lender’s security and a trust’s ownership, and why HUD’s rules exist to solve it.
📜 The Trust Test: Learn the critical difference between revocable and irrevocable trusts and why one is overwhelmingly preferred for a reverse mortgage.
📋 HUD’s Official Checklist: Get a plain-English breakdown of the exact government requirements your trust document must meet to be approved.
🚶 Step-by-Step Scenarios: Walk through the three most common situations with clear examples and tables showing the consequences of each action.
💡 Heir Survival Guide: Discover the options your children or heirs will have and how a trust can be the key to preventing a foreclosure after you pass away.

The Two Key Players: HECMs and Living Trusts

What Exactly is a Reverse Mortgage (HECM)?

A reverse mortgage is a special type of home loan for people aged 62 and older. Unlike a regular mortgage where you make monthly payments to a bank, a reverse mortgage lender pays you. The money you receive comes from the equity you have built up in your home.

The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA), a part of HUD. You don’t have to make monthly mortgage payments. Instead, the loan balance—which includes the cash you received plus accumulating interest and insurance fees—grows over time. The loan is typically repaid only when the last borrower sells the home, moves out permanently, or passes away.

A critical feature of an FHA-insured HECM is the “non-recourse” guarantee. This is a powerful protection for your family. It means that you or your heirs will never owe more than the home is worth when the loan is repaid. If the loan balance is higher than the home’s sale price, the FHA insurance fund covers the difference, protecting your estate’s other assets.

Even with no monthly mortgage payments, you are still the homeowner and have crucial responsibilities. You must continue to pay your property taxes, maintain homeowners insurance, and keep the home in good condition. Failing to meet these obligations is a loan default and can lead to foreclosure.

What is a Living Trust and Why Bother?

A living trust is a legal document that creates a sort of container to hold your assets, like your house, bank accounts, and investments. You create it during your lifetime, which is why it’s called a “living” trust. The main reason people use a living trust is to avoid probate.

Probate is the formal court process that validates your will and oversees the distribution of your assets after you die. This process can be very slow, sometimes taking months or even years. It is also expensive, with court and attorney fees reducing the inheritance left for your heirs, and it is a public record, meaning anyone can see the details of your estate.

When your home is properly titled in the name of a trust, it bypasses probate entirely. This allows your property to be transferred to your heirs privately, quickly, and with less cost.

There are four key roles in a living trust:

Grantor (or Settlor): This is you—the person who creates the trust and puts your property into it.
Trustee: This is the person who manages the trust’s assets. While you are alive and well, you are typically your own trustee, maintaining full control.
Successor Trustee: This is your designated backup. This person or institution takes over as trustee to manage the trust if you become incapacitated or after you pass away.
Beneficiary: These are the people who benefit from the trust. During your lifetime, you are the primary beneficiary. After you pass, your chosen heirs (like your children) become the beneficiaries.

The Make-or-Break Distinction: Revocable vs. Irrevocable Trusts

Why Lenders and HUD Overwhelmingly Prefer Revocable Trusts

A revocable living trust is exactly what it sounds like: you can change it, amend it, or completely cancel (revoke) it at any time as long as you are mentally competent. You, as the grantor, keep total control over all the assets inside the trust. For all practical purposes, the property is still yours.

This complete control is precisely why a revocable trust is the standard, preferred, and most straightforward option for getting a HECM. HUD’s official guidelines explicitly state that the trust must be revocable. Because you can simply dissolve the trust and take the property back at any moment, the lender’s lien is not considered to be at risk.

The High Hurdle of Irrevocable Trusts

An irrevocable trust is the opposite; once you create it and transfer your property into it, you generally cannot change or cancel it. You give up ownership and control of the assets to the trustee. This type of trust is a more advanced estate planning tool, often used to protect assets from creditors or to minimize estate taxes.

The problem for a HECM is that this loss of control directly conflicts with the loan requirement that the borrower must be the property owner. While it makes things much more difficult, it is not impossible. An irrevocable trust can be used for a HECM, but it requires highly specialized legal drafting by an expert attorney. The trust document must include very specific language that gives the borrower an absolute, lifelong right to live in the home and satisfies all other HUD rules.

The Absolute No-Go: Testamentary Trusts

One type of trust is always ineligible for a HECM: a testamentary trust. This is a trust that is written inside of a will and only comes into existence after the person who wrote the will has died. Since a HECM borrower must be alive to get the loan, a trust that doesn’t exist yet cannot be used. It fails the most basic requirement of the program.

The Official Rulebook: Decoding HUD’s Strict Requirements

The Government’s Checklist Your Trust Must Pass

For a lender to approve a HECM on a property held in a trust, the trust document itself must pass a detailed inspection. The rules are laid out in HUD Handbook 4235.1 and are non-negotiable. Your trust must meet every one of these conditions.

It Must Be a Revocable Living Trust. The trust must have been created during your lifetime (inter vivos) and you must have the power to revoke it. A trust that automatically becomes irrevocable if one spouse dies may be rejected.
All Current Beneficiaries Must Be Eligible Borrowers. Every person who has a current right to benefit from the trust must be at least 62 years old and live in the home as their primary residence.
Heirs (Contingent Beneficiaries) Are Exempt. People named to inherit the property only after all the current borrowers have passed away do not need to be 62 or live in the home.
It Must Guarantee Lifelong Occupancy. The trust must contain specific, explicit language that gives each borrower the absolute legal right to live in the property for the rest of their life.
The Trustee Must Have Power to Borrow. The trust document must clearly state that the trustee has the legal authority to take out a loan and secure it by putting a mortgage on the trust’s real estate.
It Must Include a Lender Notification Clause. The trust must have a provision that requires the trustee to notify the lender of any major changes, like a change in who is living in the home or a transfer of interest in the trust.

Why the Lender Puts Your Trust Under a Microscope

Before closing, the HECM lender is required by federal law to have their attorneys perform a thorough legal review of your entire trust document. They are checking for two things: that the trust is legally valid in your state, and that it meets every single requirement on the HUD checklist.

It is important to understand a key legal point: the trust is not the borrower. You, the individual, are the borrower and the one who signs the loan agreement. The trust is the legal entity that holds the title to the property and, through the trustee, pledges the home as collateral for your loan.

The Signing Ceremony: Who Signs What and Why It Matters

The closing for a HECM with a trust involves a specific signing protocol to create a legally sound loan.

The Note and Loan Agreement: These documents create the debt and outline your responsibilities. They must be signed by you, the individual borrower.
The Mortgage (or Deed of Trust): This is the document that places the lien on the property. It must be signed by the trustee in their official capacity (e.g., “Jane Doe, Trustee”). In many states, you as the individual borrower may also have to sign this document to ensure the lien is valid.

You may also notice there are two sets of notes and mortgages: one for the lender and a second one for HUD. This is a standard protection for you. The second set allows HUD to step in and continue making payments to you if your lender were to ever go out of business, ensuring your funds are never interrupted.

The Three Main Scenarios: A Step-by-Step Playbook

Scenario 1: Your Home is Already in a Trust and You Want a HECM

This is for homeowners who have already done their estate planning and their home is titled in the name of their trust. The process is straightforward but requires careful verification.

Step	Critical Consequence
1. Attorney Review	Your estate planning attorney must first review your existing trust to confirm it grants the trustee the power to mortgage property. If this clause is missing, you cannot proceed.
2. Lender Application	You apply for the HECM and provide the lender with a complete copy of your signed trust document. The lender’s legal team begins its mandatory review.
3. Trust Amendment (If Needed)	If the lender finds your trust is missing HUD-required language, you must have your attorney draft a formal “amendment” to add it. The loan is on hold until the lender approves the amended trust.
4. Loan Closing	Once the trust is approved, you proceed to closing. You sign the loan agreement as an individual, and the trustee (likely also you) signs the mortgage document.

Example: Robert and Susan, both 78, put their home in “The Robert and Susan Jones Family Trust” in 2015. They now want a HECM. Their attorney confirms their trust allows them, as trustees, to borrow against the property. They apply, the lender’s lawyers review and approve the trust, and they close the loan without needing any changes.

Scenario 2: You Have a HECM and Want to Create a Trust

This applies to existing HECM borrowers who now want to create a trust for estate planning. This scenario has one golden rule that cannot be broken.

Action	Potential Disaster
1. Contact Your Loan Servicer	*Before you do anything else,* you must contact your HECM servicer and get their written permission to transfer the title. This is not optional.
2. Submit Draft Trust for Review	Your attorney will draft a new, HECM-compliant trust. You must send this draft to the servicer for their legal team to review and approve.
3. Wait for Written Approval	Do not sign anything or change the title until you have a formal approval letter from the servicer in your hands.
4. Transfer the Title	Only after receiving written approval, you can sign the trust and have your attorney record a new deed that transfers the home’s title from your name into the trust’s name.

The Golden Rule: Your mortgage agreement contains a “due-on-transfer” clause. Transferring your home’s title into a trust without the lender’s prior written consent is a breach of your loan contract. This can trigger the clause, allowing the lender to call your entire loan balance due and payable immediately, forcing you into foreclosure.

Scenario 3: The Endgame for Heirs – Inheriting a HECM in a Trust

A primary reason for using a trust is to make things easier for your heirs. When a HECM is involved, the trust becomes even more vital. The loan becomes due when the last borrower passes away or moves out for more than 12 months. The successor trustee then has three main choices.

Heir’s Choice	Financial Outcome
1. Keep the Home	The heir/trust must pay off the HECM loan. They can do this by paying the *lesser* of the full loan balance or *95% of the home’s current appraised value*. The FHA insurance covers any shortfall.
2. Sell the Home	The successor trustee sells the property. The sale proceeds first pay off the HECM. All remaining money is equity that belongs to the trust and is distributed to the beneficiaries.
3. Walk Away	If the loan balance is more than the home is worth, the heir can give the property to the lender (a “deed-in-lieu of foreclosure”). The non-recourse feature means the debt is fully satisfied and the lender cannot touch any other trust assets.

The Trust’s Superpower: Without a trust, the home must go through probate court. A judge must appoint an executor before anyone has the legal authority to sell the house or even talk to the lender. This can take months, creating a direct conflict with the lender’s 6-month timeline to be repaid, often leading to foreclosure. A trust avoids this entirely. The successor trustee has immediate authority to act, ensuring they can manage the process without the pressure of a court-induced delay.

Navigating the Process: Do’s, Don’ts, and Common Mistakes

Mistakes to Avoid: Common and Costly Errors

Combining these tools requires precision. A simple mistake can have severe consequences.

Transferring Title Without Permission: This is the most catastrophic error. Always get written approval from your servicer before deeding your HECM-financed property into a trust.
Assuming an Old Trust is Compliant: A trust drafted 10 or 20 years ago likely will not contain the specific language HUD now requires. It must be reviewed and likely amended.
Naming an Ineligible Current Beneficiary: Naming a child under 62 as a current beneficiary (instead of a contingent one) will make the trust ineligible for a HECM.
Heirs Not Knowing Their Rights: Many heirs are unaware they can keep the home by paying only 95% of its appraised value if the loan balance is higher. This is a critical protection they might miss.

Do’s and Don’ts for Homeowners

Do’s	Don’ts
✅ Do Consult an Elder Law or Estate Attorney. This is not a DIY project. You need an expert who understands both HECMs and trusts.	❌ Don’t Assume Your Financial Advisor Knows the Rules. While well-intentioned, they may not know the specific HUD legal requirements.
✅ Do Get Lender Approval in Writing. Whether getting a new HECM or creating a new trust, get the lender’s approval on paper before acting.	❌ Don’t Let Anyone Rush You. Take your time to understand the documents and the process. High-pressure tactics are a major red flag.
✅ Do Review Your Trust’s Specific Powers. Ensure the document explicitly gives the trustee the power to mortgage real estate.	❌ Don’t Forget About Ongoing Duties. You must still pay property taxes and insurance. A trust does not change these core HECM obligations.
✅ Do Keep Your Heirs Informed. Talk to your successor trustee and beneficiaries about the HECM and their options so they are prepared.	❌ Don’t Mix Up Beneficiary Types. Your children should be named as contingent beneficiaries, not current beneficiaries.
✅ Do Provide the Full Trust to the Lender. The lender must review the entire document, not just a summary, to certify its compliance.	❌ Don’t Amend Your Trust Later Without Notifying the Servicer. A future change could inadvertently violate your loan terms.

Pros and Cons of Combining a HECM and a Trust

Pros	Cons
Avoids Probate: This is the biggest advantage. It saves your heirs significant time, money, and stress by keeping the home out of court.	Requires Strict Compliance: The trust must meet very specific and technical HUD requirements, or the loan will be denied or called due.
Immediate Authority for Heirs: The successor trustee can immediately manage the property after your death, preventing foreclosure delays caused by the probate process.	Increased Legal Costs: You will need to pay an experienced attorney to either draft a new, compliant trust or amend your existing one.
Maintains Privacy: Unlike a will, which becomes a public record during probate, the terms of your trust and the distribution of your assets remain private.	Potential for Error: A mistake in the trust language or in the process of transferring title can jeopardize the entire arrangement.
Provides for Incapacity: A trust allows your successor trustee to manage the property and your finances if you become unable to do so yourself, avoiding a court-supervised conservatorship.	Lender Review Can Cause Delays: The mandatory legal review of the trust by the lender or servicer can add time to the loan application or title transfer process.
Streamlines Estate Settlement: By avoiding court delays, the successor trustee can work within the lender’s timeline to sell the home or arrange financing to pay off the HECM.	Not All Trusts Qualify: Irrevocable and testamentary trusts create significant hurdles or are outright ineligible, limiting options for some estate plans.

Frequently Asked Questions (FAQs)

Can I take my house out of my trust to get the reverse mortgage? Yes. If your trust doesn’t meet HUD rules, you can deed the property out of the trust, get the HECM in your name, and then transfer it back into a new, compliant trust with lender approval.
Does my son, who will inherit the house, need to be 62? No. As a contingent beneficiary who only inherits after you pass away, his age does not matter for your loan eligibility. Only current beneficiaries must be 62 or older.
What if my trust becomes irrevocable when my spouse dies? This is a major red flag for lenders. A trust that becomes fully irrevocable while a surviving borrower is still living may become ineligible. An attorney must ensure the language protects the survivor’s rights properly.
Can I, as the successor trustee, get a HECM on the home after my parents die? No. A HECM is for an owner-occupant. When your parents pass away, the existing loan becomes due. Your role as successor trustee is to settle that loan, not to originate a new one.
Does the lender need to see my entire trust document? Yes. Lenders are required by HUD to perform a full legal review of the entire trust agreement and any amendments to certify that it is fully compliant. They cannot approve a loan based on excerpts.
Can I amend my trust after I already have a HECM? Yes, but you should notify your loan servicer first. Certain changes, especially to beneficiaries or occupancy rights, could violate your loan agreement. A quick review by the servicer can prevent major problems.
Is an irrevocable trust ever eligible for a HECM? Yes, but it is complex. The trust must be specially drafted by an expert attorney to include language that guarantees the borrower a lifelong right to occupy the home and meets all other HUD requirements.