Define: Trust Deed

A trust deed is a legal document that establishes a trust, a legal arrangement where one party, known as the settlor, transfers assets to another party, known as the trustee, to hold and manage for the benefit of a third party, known as the beneficiary. The trust deed outlines the terms and conditions of the trust, including the powers and duties of the trustee, the rights of the beneficiaries, and the distribution of assets. Trust deeds are commonly used for estate planning, asset protection, charitable giving, and managing assets on behalf of minors or individuals with disabilities. They provide a flexible and efficient way to transfer and protect assets while ensuring that the settlor’s wishes are carried out according to their instructions. Trust deeds are legally binding documents and must be executed in accordance with relevant laws and regulations.

Mortgages are the most common method of financing real estate purchases in California (most other states use them). The trust deed transfers the title to the property to a trustee, often a title company, who holds it as security for a loan. When the loan is paid off, the title is transferred to the borrower. The trustee will not become involved in the arrangement unless the borrower defaults on the loan. At that point, the trustee can sell the property and pay the lender with the proceeds.

In real estate, a trust deed, or deed of trust, is a document wherein a specific financial interest in the title to real property is held by a trustee, who holds it as security for a loan. When the loan is fully paid, the monetary claim on the title is transferred to the borrower by reconveyance. If the borrower defaults on the loan, the trustee has the right to foreclose on and transfer title to the lender or sell the property to pay the lender from the proceeds.

Trust deeds are the most common instrument used in financing real estate purchases in Alaska, Arizona, California, Colorado, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia, and West Virginia, whereas most other states use mortgages. Deeds of trust can also be for loans made for other purposes, where real estate is used as collateral.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th April 2024.