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Understanding Title Insurance Requirements For Insuring Living Trusts
By Matt Unangst, 23 Jan 16:17
• Only the trustee can own or control real property for the trust
• A title company requires some paperwork for trusts holding titles
• A trustees actions are limited by the trust agreement
Living trusts have become more and more common in recent years as a way to avoid the arduous probate process. Trusts can hold real property like individuals do, but there are a few differences in the way title companies insure trusts, as opposed to individuals.
Trusts are agreements that allow a trustee (who is named in the agreement) to administer the assets of the trustor (the creator of the trust) for the use and benefit of the trust’s beneficiaries (who are named in the trust agreement). The trustee has power over the trust and is the only person who can make decisions for the trust, including acquiring or conveying interest in real property. The trustee’s powers over property can be no greater than those originally laid out in the trust agreement.
Title companies require some paperwork in order to insure a property held by a trustee on behalf of a trust. This paperwork is to ensure that the trust and the trustee’s holding of the property are valid. A certification of the trust is required with the following information:
• Date of execution of the trust
• Identities of the trustor and trustee(s)
• The trustee(s)’s powers
• Identity of any person who has the power to revoke the trust
• Signature authority of the trustee(s)
• How the title to the trust assets is to be taken
• Legal description of the trust’s interest in the property
• Statement that the trust has not been modified, amended, or revoked in a way that would affect the previous elements in the certification and that all current trustees are signing the certification.
Under some trust agreements with multiple trustees, one of the trustees can apply for title insurance without the others’ approval. For this to be allowed, it must specifically be stated in the trust agreement. This is also the case with power-of-attorney – a trustee can give someone power of attorney for the trust only if specifically allowed to do so.
If all of the trustees die or are unable to act, and the trustor is either unable to appoint a new trustee, or is prohibited from doing so by the trust agreement, a court can appoint a new trustee.
Nearly anyone can be a trustee. The only requirement is that he/she is not under legal disability. Many corporations can also be trustees, but they must first qualify to do trust business within the state.
If a trustee is holding property on behalf of a trust, the title’s wording will be worded to reflect this fact.
There are not too many difference in title insurance requirements between property held by individuals and property held on behalf of trusts. There is a bit more paperwork involved, but this is relatively minor. Trustees are constrained by the trust agreement in managing the property, so there is little worry for the title company in issuing the insurance.
KEYWORDS: living trust, title insurance, title company, trustee, trustor, real estate
Tags: title insurance living trusts