The Challenges of Transactions Involving Trusts or Trust Property

Some loan transactions may involve trusts as borrowers, guarantors or pledgers of collateral. If the trust instruments permit, lenders may enter into transactions involving trusts, including those when the trustee or beneficiaries use the trust property as security for a loan. Even with permissive trust language, lenders should be careful in such transactions to ensure loan documents are properly executed and that the provisions and requirements of the Uniform Trust Code are complied with in order to ensure that the loan documents are enforceable and the lender receives a valid, perfected and enforceable security interest in the trust property or a valid obligation of the trust as borrower or guarantor.