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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 |
