UNDERSTANDING LIVING TRUSTS
What is a living trust?
A living trust is an estate planning tool, created by a written document, through which your assets are placed into trust for your benefit during your lifetime, with you as trustee; and then transferred to designated beneficiaries after your death, by your chosen representative called a successor trustee. The living trust is normally used in order to avoid the costs and time-consuming process involved in probate, and to carry out your instructions if you are unable to manage your financial, legal, and healthcare affairs due to incapacity.
Who can be a trustee?
A trustee may either be an individual not under a legal disability or a corporation qualified to do trust business by the state.
Are there any limitations to what a trustee may do?
The living trust document (“Trust”) will govern; a trustee is limited by the provisions of the Trust and may only act within the terms of the Trust. The Probate Code also contains general powers which, unless limited by the trust documents, are sufficient for title insurers to rely on for sale, conveyance, and refinance purposes.
Is the trustee able to grant power-of-attorney to another to act on behalf of the trust?
The Trust and applicable laws will govern; an individual may only be granted power-of-attorney if the Trust specifically provides that the trustee is able to grant such power-of-attorney. That individual may only act in accordance with the powers set forth in the Trust, the governing documents and those permissible by law.
What happens if the trustees have died or are unwilling to act?
If all the trustees have died and there are no named successor trustees, or if the trustee is not able to or willing to act or if the Trust provisions prohibit the trustee from appointing a new trustee, a court of competent jurisdiction will determine the disposition of the Trust property in harmony with the rights of the beneficiaries.
Can one trustee sign if the Trust names more than one trustee?
The Trust will govern and must specifically provide for less than all trustees to sign.
Can the Trust be revoked during my lifetime?
The Trust will govern. Typically, a living trust may be revoked during the lifetime of the creator of the trust which allows for great flexibility in dealing with assets and changed circumstances.
Can the trustee borrow money on trust property?
The living trust document will govern. Typically, a living trust allows the trustee to buy, sell and mortgage property put into the trust. However, some lenders will not loan money to trusts and will require the trustee to transfer title out of the trust in order to borrow against the property. If the parties desire, afterwards, the trustee is able to transfer the property back to the trust.
What does the title company require when a transaction involves property held in trust?
Stewart Title of California, Inc. will, among other things, require a completed certification of trust that provides the following:
1. Date of execution of the trust instrument,
2. Identity of the trustor and trustees as well as any individuals who have power to revoke the trust;
3. Powers of the trustees,
4. Signing authority of the trustees,
5. Manner in which title to the trust assets should be held,
6. Legal description of any property held by the trust,
7. Statement that the trust has not been revoked or amended; if, however the living trust has been revoked or amended then further assessment and conditions will need to be met, and in some circumstances, you may be required to provide the entire Trust for review.
Please note that this information is provided for general informational purposes only, is subject to change without notice and should not be relied upon; please contact your CPA, tax professional or other legal advisors for further information.
