In today’s world of busy probate courts, the living trust has become a common manner of holding title to real property. Rather than endure the time and expense of a long probate, more and more homeowners have chosen to create living trusts to hold title to their property.
A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust. A “living trust” is simply a trust you create while you’re alive, rather than one that is created at your death.
Different kinds of living trusts can help you avoid probate, reduce estate taxes, or set up long-term property or estate management.
The big advantage to making a living trust is that property left through the trust doesn’t have to go through through probate court. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it. The average probate drags on for months before the inheritors get anything. And by that time, there’s less for them to get: In many cases, about 5% of the property has been eaten up by lawyer and court fees.
Property you transfer into a living trust before your death doesn’t go through probate. The successor trustee — the person you appoint to handle the trust after your death — simply transfers ownership to the beneficiaries you named in the trust. In many cases, the whole process takes only a few weeks, and there are no lawyer or court fees to pay. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.
The following may help you understand a few of the requirements if title to the property is conveyed to the trustee of a living trust.
Q. What is a trust?
An agreement between a trustor and trustee for the trustee to hold title to and administer designated assets of the trustor for the use and benefit of one or more beneficiaries.
Q. Can a trust itself acquire and convey interests in real property?
No. The living trust is an arrangement between a trustee and a trustor. Only the trustee, on behalf of the trust, may own and convey any interest in real property. The trustee may only exercise the powers granted in the trust.
Q. What will the title company require if a trustee holds the title to the property which is part of the trust?
A certification of trust containing the following information: 1. The date of execution of the trust instrument, 2. The identity of the trustor and trustee, 3. The powers of the trustee, 4. The identity of person with power to revoke trust, if any, 5. The signature authority of the trustees, 6. The manner in which title to the trust assets should be taken, 7. The legal description of any interest in the property held by the trust, and 8. A statement that the trust has not been revoked, modified, or amended in any manner which would cause the certification to be incorrect and that the certification is being signed by all currently acting trustees of the trust.
Q If there is more than one trustee, can just one sign?
Maybe. The trust must specifically provide for less than all to sign.
Q. Can the trustee give someone a power-of-attorney?
Only if the trust specifically provides for the appointment of an attorney-in-fact.
Q. What will the title company require if all the trustees have died or are unwilling to act?
If the trustor is not able to do so, or the trust provisions prohibit the trustor from appointing a new trustee, the court may do so.
Q. Who can be trustee?
Any individual not under a legal disability or a corporation that has qualified to do a trust business in the state of California.
Q. How does a notary acknowledge the signature of the trustee?
Title is vested in the trustee. Hence, if the trustee is an individual or a corporation, then the new general form of acknowledgment will be prepared to reflect the intrinsic nature of the trustee.
Q. How would the deed to the trustee ordinarily be worded to transfer title to the trustee?
“John Doe and Mary Doe, as trustees of the Doe family trust, under declaration of trust dated January 1, 1992.”
Q. Are there any limitations on what a trustee may do?
Yes, the trustee is limited principally and most importantly by the provisions of the trust and, thus, may only act within the terms of the trust. The Probate Code contains general powers which, unless limited by the trust agreement, are sufficient for title insurers to rely on for sale, conveyance, and refinance purposes.
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