When a Due-on-Sale Clause Cannot Be Enforced
The Garn-St. Germain Depository Institutions Act (12 U.S.C. 1701j-3) was passed by Congress in 1982. It blocks lenders from enforcing due-on-sale clauses in several estate planning situations:
- Transfers into a revocable living trust where the borrower remains a beneficiary
- Transfers from the death of a joint tenant or tenant by the entirety
- Transfers to a spouse or children of the borrower
- Transfers from a divorce decree or legal separation
Arizona further regulates enforcement through A.R.S. 33-1571. That statute adopted the federal framework. It also added transitional protections for certain older residential loans.
Why This Matters for Estate Planning
Due-on-sale clauses are a common concern when transferring a mortgaged home into a living trust. In most residential situations, federal protections prevent the clause from being triggered. Understanding this is important for trust funding and property title decisions.
Transferring a Mortgaged Home Into a Trust: Full Guide
For details on how the Garn-St. Germain Act protects Arizona homeowners, see our guide: Can You Put a House in a Trust With a Mortgage?.