Last updated: June 2025
Can you fund your trust with home equity? Yes, it’s possible—but there are some fundamental factors you need to understand.
Why homeowners use home equity to fund their trust
The real estate we own is typically our largest source of wealth. However, unless you can access its value, it can’t be used for any investments.
Home equity lending may provide the ideal access method for funding your trust.
In this article, we’ll walk through the key legal and lending considerations for homeowners who want to fund a trust with home equity
We’ll also explore the strategy of using a home equity line of credit (HELOC) for fast and efficient funding of your trust.
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How to fund a trust with home equity
Funding a trust means transferring assets into that trust so the trustee can manage them according to your wishes. In most cases, people contribute cash, investments, or real estate into the trust.
Rather than directly transferring your home into the trust (which raises its own title and lending complications), you can keep your property in your name and use a HELOC to draw funds from your equity.
These funds can then be added to the trust’s bank account or used to purchase trust-held assets.
This method is especially useful when you want your trust to:
- Hold investment assets
- Hold life insurance policies
- Create a reserve for care expenses or future distributions to beneficiaries
Can you use a HELOC to fund a trust?
Yes, you can use a HELOC to fund a trust, but with important caveats.
What is a HELOC?
A HELOC allows you to borrow against the equity in your home and use that money for virtually any purpose, including trust funding.
However, the home itself remains the collateral for the HELOC and must usually be titled in your personal name or a revocable living trust that meets the lender’s criteria.
That means you’re not placing your home in the trust; rather, you’re borrowing against it and then transferring cash to the trust.
For example, you might draw $50,000 from your HELOC and deposit that amount into the trust’s bank account.
From there, your trustee could invest the funds, use them to pay insurance premiums, or follow specific distribution instructions you’ve outlined.
Keep in mind: HELOCs require repayment, so using this method involves assuming debt, even if the purpose is strategic estate planning.
Lending rules and restrictions to know
Not all lenders treat trusts in the same manner. When applying for a HELOC, it’s important to understand what ownership structures are accepted.
Most lenders—including HomeEQ—prefer or require the home to be titled either in your personal name or in a revocable living trust that meets specific guidelines.
Considerations to review:
- Trust compliance: If your property is already in a trust, it must contain language that authorizes the trustee to borrow money and pledge the property as collateral
- Due-on-sale clause: Transferring a mortgaged home into a trust can potentially trigger this clause—some lenders may view ownership transfers as a risk
- Documentation requirements: Have a copy of the trust agreement ready to verify that the trustee has legal authority to take out a loan secured by the property
- Underwriting differences: Some lenders may not allow lending to properties held in irrevocable trusts or complex estate structures
Always verify the lending policies with your HELOC provider before applying for a loan.
Legal considerations and when to consult a professional
Funding a trust with home equity requires alignment between your estate planning and lending strategy. Working with your estate attorney or financial advisor is advisable before moving forward.
Here are a few legal and financial questions to explore:
- Does your trust allow borrowing or accepting gifts?
- Are you the trustee, or is someone else making the financial decisions?
- Are there gift tax implications when moving equity-derived cash into a trust?
- Is your HELOC structure (draw period, repayment terms) suitable for long-term planning?
This isn’t a do-it-yourself maneuver. A professional can help ensure your trust is drafted correctly, your actions are in line with IRS rules, and your funding strategy won’t create future conflicts.
Steps to fund your trust with a HELOC
If you’re ready to explore this strategy, here’s how to get started:
- Estimate your available equity: Use a tool like our HELOC Loan Calculator to see how much you may qualify to borrow.
- Apply for a HELOC: Submit your application through a fully digital process with HomeEQ.
- Draw your funds: If approved, draw the amount you intend to fund your trust with; keep in mind your interest-only draw period and repayment plan.
- Transfer funds to your trust’s account: Wire or deposit the borrowed amount into the trust’s account, following your attorney’s instructions.
- Document the transaction: Keep clear records showing the source of funds and how they were moved into the trust—your trustee will need this for compliance and accounting purposes.
Explore your trust funding options with HomeEQ
A HELOC can be a smart, flexible tool for estate planning when used carefully. If you’re considering how to fund your trust and need access to liquidity, tapping your home equity might be the solution.
Ready to fund your trust the smart way?
Check your equity eligibility in minutes with HomeEQ’s self-service HELOC application — no paperwork, no pressure.
Disclaimer: This HomeEQ article is for informational purposes only and does not constitute legal or financial advice. A licensed attorney or tax professional should be consulted before making trust or equity-related decisions.
