Deed of Trust: Templates & More

A deed of trust functions similarly to a mortgage, in that it is a document evidencing a legal obligation from a borrower to a lender regarding the purchase of real property (e.g., home, building, a plot of land, etc.). The executed deed of trust is then recorded (filed) with the county where the property is located.

A deed of trust involves three parties: 

1. borrower (referred to as “trustor”) 
2. lender (referred to as “beneficiary”)
3. third-party trustee (referred to as “trustee”)

The trustee in a deed of trust is often a title insurance company, escrow company or financial institution.

In a deed of trust, the trustee holds legal title to the property until the borrower repays the loan. Once the loan is fully paid, the trustee transfers the legal title to the borrower. If the borrower defaults on the loan, the trustee can foreclose on the property on behalf of the lender. It is important to note that the term “trustee” means something different in the deed of trust context than in other legal contexts. Due to this, a third-party trustee in a deed of trust is not held to the same fiduciary standards as “trustees” in other contexts (cf. revocable trust). 

Please also note that laws governing deeds of trust vary by state and that deeds of trust are more commonly used in some U.S. states than others.