Do Land Trusts and Anonymity Trusts Really Bypass the Due-on-Sale Clause in Texas?
By Mike Massey Law – Texas Estate Planning and Asset Protection Attorneys
🏡 What Is a Land Trust or Anonymity Trust?
In Texas, a land trust or anonymity trust is a legal tool used to hold title to real estate while keeping the real owner’s name off the public record. These trusts are often used for privacy, estate planning, and asset protection.
Typically, the trustee’s name appears on the deed (not the beneficiary’s), and the trust agreement remains private. This structure gives individuals a layer of privacy — often appealing to landlords, business owners, or high-net-worth individuals who prefer not to have their names searchable in public databases.
🔍 Can Land Trusts Help You Avoid the Due-on-Sale Clause?
This is one of the most misunderstood aspects of real estate law — especially in Texas.
Some promoters and even lawyers suggest that you can transfer a mortgaged property into a trust (like a land trust) without triggering the due-on-sale clause in your mortgage.
Let’s break this down.
📜 What Is the Due-on-Sale Clause?
A due-on-sale clause is language found in most mortgage agreements that allows the lender to call the full loan due (require full repayment) if the property is transferred to someone else without the lender’s permission.
So, even if you’re current on payments, a transfer of ownership could trigger this clause — and in theory, the bank could foreclose if you don’t pay off the balance.
⚖️ The Federal Exception: The Garn-St. Germain Act
Here’s where it gets nuanced.
Under the Garn-St. Germain Depository Institutions Act of 1982 (12 U.S. Code § 1701j–3), you are exempt from the due-on-sale clause if all of the following are true:
The property is residential real estate (1–4 units).
The borrower transfers the property to their own revocable living trust.
The borrower remains a beneficiary of the trust.
The borrower continues to occupy the property as their primary residence.
✅ So yes — if you’re putting your home into your own revocable trust, you may be protected under federal law if you satisfy the Act’s provisions.
❌ But if you’re putting a rental property, vacation home, or commercial building into a trust — or transferring it to an LLC — you do risk violating the due-on-sale clause.
⚠️ The Land Trust Myth
Some legal marketers present land trusts or anonymity trusts as a clever workaround for the due-on-sale clause — but the truth is:
Just using a trust doesn’t automatically protect you from your lender’s rights.
If your property is not your primary residence or the trust doesn’t meet the criteria outlined in the Garn-St. Germain Act, you’re rolling the dice.
Even if the trust’s name shows up on the deed and your personal name is hidden, lenders can — and sometimes do — dig deeper. If they find out you’ve transferred title without notifying them, they may exercise their right to call the note.
📌 Everything Has Pros and Cons — Including Land Trusts
We’re not here to say that land trusts, anonymity trusts, or LLC structures are bad. In fact, they can be powerful tools when used correctly.
But every tool has a tradeoff, and land trusts are no exception.
✅ Pros of Land Trusts / Anonymity Trusts
Privacy: Your name doesn’t appear on public real estate records.
Asset Protection Layer: Makes it harder for someone to easily connect you to all your assets.
Estate Planning: Can facilitate smoother transfer of property at death.
Negotiation Leverage: Sellers and buyers sometimes use them to avoid disclosing ownership in competitive markets.
❌ Cons of Land Trusts / Anonymity Trusts
No automatic protection from due-on-sale clauses for rental or commercial properties.
Not foolproof: Courts and creditors may be able to subpoena trust documents.
Can complicate lending and refinancing: Some lenders won’t underwrite properties in trusts.
We’re not saying to use these or not use these, but to encourage you to do your homework and be careful of what you read on the internet or see in videos. Some strategies are legit, some are hype, but all strategies, have pros and cons, so make sure to weigh them for your situation.
🧠 Education First, Then Action
At Mike Massey Law, we’re all about empowering you with truthful, practical guidance — not just selling trendy strategies, even if the strategy may have merit
But we also believe this:
Nothing in life is risk-free. Every legal strategy has pros and cons.
If someone is promising that a trust will give you bulletproof protection without violating your mortgage agreement, then do your research.
📝 Final Word: Get Informed Before You Transfer
We’re not saying don’t use a land trust or anonymity trust.
We’re simply saying:
✔️ Understand the benefits and the risks.
✔️ Know what your mortgage allows.
✔️ Make sure your goals (privacy, protection, planning) align with the strategy.
✔️ Consult an experienced Texas attorney before transferring any property subject to a mortgage.
Some people get permission from lenders prior to transfer. Some lenders may allow certain transfers in certain situations. Some may put it in writing, but probably most will not. I’ve never seen a mortgage note called due as a result from a transfer to a trust or LLC. I’m sure it’s happened, but I’ve never seen it, nor have I heard any other attorneys tell me they’ve seen it happen either. But banks are banks, and they can be hard to predict.
👋 Let’s Talk
Thinking about transferring real estate to a trust or LLC? We’re happy to help you weigh the pros and cons for your unique situation.
📅 Book a consultation: bit.ly/consultalawyer
📥 Grab our free estate planning checklist: bit.ly/livingtrustwebinar
Mike Massey Law PLLC
Texas Estate Planning & Asset Protection Attorneys
Serving all of Texas
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Always consult an attorney for advice regarding your specific legal situation.
