Garn-St Germain Depository Institutions Act


Question: I have created a Medicaid Qualifying Irrevocable Trust and I am attempting to transfer my home to my trust. The bank which holds my mortgage has advised that they do not allow transfers to Irrevocable Trusts. Can they prevent me from protecting my house?  What can they do?

Answer: No, your bank should allow the transfer of your home to you Irrevocable Trust. First, it is important to understand why your bank is pushing back on this transfer. Your bank is likely claiming that this transfer is triggering the “due-on-sale” clause in your mortgage agreement.

What Is a Due-on-Sale Clause in Real Estate?

A “due-on-sale” clause is a provision that states the entire amount of the remaining debt owed on your mortgage becomes due and payable upon the transfer of your property. Your bank may make the claim that that the transfer to your trust allows them to accelerate the mortgage and demand payment in full.

The federal statute, the Garn-St Germain Depository Institutions Act of 1982, 12 U.S.C. §1701j-3, authorizes the use of such due-on-sale clauses.  However, this statute also lists several exceptions to the a due-on-sale provision. One exception applies to transferring your property to a trust. This includes residential property with one to four units and to stock allocated to a cooperative unit.

Garn-St Germain Due-on-Sale Clause Exceptions

Specific to your situation, the act prohibits the exercise of the due-on-sale clause in regard to “a transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.”  Some banks allege a hard and fast rule that they will allow mortgage holders to transfer their property to a Revocable Trust but not to an Irrevocable Trust. However, such a policy clearly violates this federal statute.  If your trust is (1) an inter-vivos trust, which means it was created during your lifetime as opposed to in your will; and (2) you are a beneficiary of the trust; and (3) you are not transferring you right to occupy the property.

An Experienced Estate Planning Attorney Can Help

As a result, the transfer of you home to your Medicaid Qualifying Irrevocable Trust likely meets the qualifications of this exception and should not trigger the due-on-sale clause of your mortgage. An estate planning attorney can review your trust to ensure it meets the requirements of this federal statute and advise regarding the transfer of your property to your trust.


Nancy Burner, Esq. and Elaine Siegmund, Esq.

Burner Law Group, P.C.

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