finance

beneficiary

In a deed of trust, the beneficiary is the lender, who receives the benefit of the security arrangement. The borrower is the trustor, and a neutral third-party trustee holds legal title until the loan is paid. If the borrower defaults, the beneficiary can instruct the trustee to sell the property. More generally, a beneficiary is anyone who receives benefits from a trust, will, or insurance policy.

Exam tip: In deed-of-trust questions, beneficiary = lender, trustor = borrower, trustee = third party holding title. Students often reverse trustor and beneficiary.
Example: A borrower signs a deed of trust in favor of a bank as beneficiary, with a title company named as trustee.

1. A homeowner transfers title to a revocable living trust in which she remains a beneficiary and occupant. The mortgage has a due-on-sale clause. Can the lender accelerate the loan because of this transfer?

Answer & explanation

Answer: D. The Garn-St Germain Act prohibits exercising a due-on-sale clause on residential property of fewer than five units for certain transfers, including to an inter vivos trust in which the borrower remains a beneficiary and occupant, and transfers to a spouse or children. The general rule that transfers trigger the clause has these specific exceptions.

Related terms & state variants

deed of trust mortgagee trustee trustor

Sources

Source verification pending. Confirm current requirements with your state regulator.

Last verified: 2026-10-23