The trust agreement describes the property to be contained within the trust, usually on one or more attached schedules. The agreement may go to great lengths to include legal descriptions, describing in detail specific property that is part of the trust. A person may mistakenly believe that because the trust agreement states property is held by the trust, it automatically becomes so. Unfortunately, real property is not conveyed by an unrecorded agreement but by deed. A title company asked to insure title to trust property usually will not insure ownership merely based on statements in an unrecorded trust agreement.
Deed to Trust's Name
Someone who has prepared deeds between individuals or from an individual to a corporation in the past may feel sufficiently competent to prepare a deed from himself to his trust. He may state in the deed that the property is being conveyed to the “XYZ Trust.” Unfortunately, unlike a corporation which is a legal entity that can hold title and convey property in its own name, a trust generally may not unless a particular state’s laws provide otherwise. Just because a trust may be a separate tax entity with a separate tax ID number doesn’t mean it qualifies as a legal entity for property conveyance purposes.
Deed to Trustees’ Names
The trustees that are appointed in a trust agreement or last will and testament are in a position of managing property and assets for the beneficiaries of the trust and are proper parties to acquire title on behalf of the trust. A title insurance company may refuse to recognize a deed as a legal conveyance when the grantee is “XYZ Trust;" however, it will generally recognize a legal vested party as “John Smith, as Trustee of the XYZ Trust.” Even if the deed is vested in a trustee that has resigned or otherwise ceased to act as trustee, a title company will generally insure a future sale by the successor trustee upon obtaining sufficient proof that the successor trustee has the authority to act in conveying property on behalf of the trust.
A testamentary trust is a trust established by a last will and testament and only becomes effective upon the death of the testator, or maker of the will. For example, a will may state the testator leaves or devises property to a trust he has named “The Smith Family Testamentary Trust,” naming “John Smith” as trustee, granting him power to act for the trust, in addition to naming the beneficiaries of the trust and setting forth any other terms and conditions that are generally established in a trust agreement. As with any other person or charity who inherits under a will, property devised to a trust generally vests or transfers upon acceptance of the will by the court for probate, subject to any rights of estate creditors. Once the estate is settled, a title company will generally consider property owned by “John Smith, as Trustee of The Smith Family Testamentary Trust,” whether or not there is an executor’s deed filed in the real property records reflecting conveyance to the trustees of the trust.