Can a Trustee Take Out a Loan on Trust Property in California?

Julian Perry
Jul 7
2 min read

California trust property with mountains for trustee loan.

Short answer: yes.

But it's more nuanced than a regular mortgage.

Let me walk you through it.

What gives a trustee the authority to borrow?

The trust document itself.

Most well-drafted trusts in California give the trustee the power to encumber trust property — meaning they can take out a loan against it.

Before doing anything — read the trust document. Look for language about borrowing, encumbering, or mortgaging property.

If it's there — you have the authority to proceed.

If it's not clear — talk to your estate attorney before moving forward.

What type of trust matters a lot

Revocable trust — the original trustor is still alive. The trust can still be changed. Banks will usually lend here if the trustor qualifies personally.

Irrevocable trust — the trustor has passed. No changes can be made. Banks almost always say no because they can't lend to an irrevocable trust the same way.

This is where private lenders come in. We make loans directly to irrevocable trusts on a regular basis.

What does the trustee need to do?

Review the trust document for borrowing authority
Determine the purpose of the loan — is it in the best interest of the beneficiaries?
Consult with an estate attorney if unsure
Find a lender who can lend directly to the trust
Sign loan documents as trustee — not personally

That last point is important. When a trustee signs a trust loan, they sign in their capacity as trustee. They are not personally liable for the loan — the trust is.