Can Bank Go After Trust Money To Pay Off Mortgage Loan?

by k winterle

My mom has a home that is not titled in the trust that has an outstanding mortgage against it. If my mom died would her trust be responsible for paying off this mortgage? Or to put another way, will the bank go after the money in the trust to pay off this loan?

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Sep 28, 2010
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by: Michael P. Pancheri

The short answer to your question is yes! The bank has a secured interest in the home and can satisfy the loan by foreclosure even though the home is now owned by the trust.

Whether the bank could go after other assets of the trust in order to satisfy the loan in the event the home does not have enough value to pay off the loan entirely is another matter.

Generally, assets in a revocable trust are subject to the claims of creditors after the grantor's death. However, the normal rules governing the claims of creditors against the assets of a revocable living trust are not the same as the rules governing claims of creditors against assets in a probate estate. For one thing, claims against a revocable living trust may be subject to a different time period for presenting the claim. In a probate estate, the claims period may be 6 to 9 months, whereas it might be as much as 3 years for a revocable trust.

Because each states laws governing the claims of creditors may be different, you really need to check the applicable state's laws.

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