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, following are answers to many commonly asked questions. 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 typical trust is the
Family Trust in which the Husband and Wife are the Trustees and, with their
children, the Beneficiaries. Those who establish the trust and transfer their
property into it are known as Trustors or Settlors. The settlor's 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 the question; some common reasons for holding property in
a Trust are to minimize or postpone death taxes, to avoid a time consuming
probate, and 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 which 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.