Estate planners often
recommend Living Trusts as a viable option when contemplating the manner in
which to hold title to real property. When a property is held in a Living
Trust, title companies have particular requirements to facilitate the
transaction. While not comprehensive, answers to many commonly asked questions
are below. If you have questions that are not answered below, your title
company representative may be able to assist you, however, one may wish to seek
legal counsel.
Who are the parties to a
Trust?
A Family Trust is a
typical trust in which the Husband and Wife are the Trustees and their children
are the Beneficiaries. Those who establish the trust and transfer their
property into it are known as Trustors or Settlors. The settlors usually
appoint themselves as Trustees and they are the primary beneficiaries during
their lifetime. After their passing, their children and grandchildren usually
become the primary beneficiaries if the trust is to survive, or the
beneficiaries receive distributions directly from the trust if it is to close
out.
What is a Living Trust?
Sometimes called an
Inter-vivos Trust, the Living Trust is created during the lifetime of the
Settlors (as opposed to being created by their Wills after death) and usually
terminates after they die and the body of the Trust is distributed to their
beneficiaries.
Can a Trust hold title to
Real Property?
No, the Trustee holds the
property on behalf of the Trust.
Is a Trust the best way
to hold my property?
Only your attorney or
accountant can answer that question. Some common reasons for holding property
in a Trust are to minimize or postpone death taxes, to avoid a time consuming
probate, and/or to shield property from attack by certain unsecured creditors.
What taxes can I avoid by
putting my property in trust?
Married persons can
usually exempt a significant part of their assets from taxation and may
postpone taxes after the first of them to die passes. You should check with
your attorney or accountant before taking any action.
Can I homestead property
that is held in a Trust?
Yes, if the property
otherwise qualifies.
Can a Trustee borrow
money against the property?
A Trustee can take any
action permitted by the terms of the Trust, and the typical Trust Agreement
does give the Trustee the authority to borrow and encumber real property.
However, not all lenders will lend on a property held in trust, so check with
your lender first.
Can someone else hold
title for me “in trust?”
Some people who do not
wish their names to show as titleholders make private arrangements with a third
party Trustee; however, such an arrangement may be illegal, and is always
inadvisable because the Trustee of record is the only one who is empowered to
convey, or borrow against, the property, and a Title Insurer cannot protect you
from a Trustee who is not acting in accordance with your wishes despite the
existence of a private agreement you have with the Trustee.