To understand title insurance requirements for insuring title in a trust, it is helpful to review a few terms:
- A trust is an agreement between one or more trustors and trustees to hold title to and administer the designated assets of the trustor for the use and advantage of the beneficiaries.
- The Trustor, Settlor, or Grantor,’ creates the trust with a written agreement.
- The Trustee is appointed by the Trustor to manage the trust and its assets for the benefit of another person.
- The Beneficiary is the one for whose benefit the trust is created.
A typical transaction will involve the sale, purchase or refinance of trust property. To insure these transactions, the title company will require the following:
- A copy of the complete and signed trust agreement or a Certificate of Trust
- The trust agreement or Certificate of Trust must identify:
- The date the trust was executed
- The identity of the trustor(s) and the trustee(s)
- The powers of the trustee(s)
- The identity of the person(s) having power to revoke the trust, if any
- Signature of the trustor.
- In addition to the information above, a Certificate of Trust must show:
- The manner in which title to the trust assets should be taken
- A legal description of any interest in the property held by the trust
- A statement that the trust has not been revoked, modified, or amended in any way that would cause the Certification to be incorrect, and that the Certification is being signed by the current trustee(s)..
- Relevant sections of the trust agreement outlining the powers of the Trustee.
Here are the answers to some frequently asked questions:
Q: Who can be a trustee?
A: Any individual not under a legal disability or a corporate entity qualified to do trust business in the state in which the trust is created.
Q: If there is more than one trustee, can just one sign on behalf of the trust?
A: Perhaps. The trust must specifically identify all parties necessary to sign.
Q: Can the trustee give someone power of attorney?
A: No, unless the trust agreement authorizes the appointment of an attorney-in-fact.
Q: What if all the trustees have died or are unwilling to act?
A: The trust agreement usually appoints successor trustees, but if not, the court may do so.
Q: Are there any limitations on what a trustee may do?
A: Yes. The trustee is limited by the provisions of the trust, and must only act within the terms of the trust.
Additionally, most states have enacted laws that contain trustee or fiduciary powers which, unless limited by the trust agreement, are sufficient for title insurers to rely upon for the purposes of sale, conveyance, and/or refinance.
Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.Published with permission from RISMedia.