Title Insurance Requirements for Insuring Trusts

In today's world, living trusts have become a common method of holding title to real property, especially due to the complexities of probate courts and estate taxes. Here are some important considerations regarding title insurance requirements when property is conveyed to the trustee of a living trust:

1. Trust Definition: A trust is an agreement between a trustor (the person creating the trust) and a trustee (the person or entity holding and administering the assets of the trust) for the benefit of one or more beneficiaries.
2. Trust's Ability to Acquire and Convey Property: The trust itself cannot acquire or convey interests in real property. Only the trustee, acting on behalf of the trust, can hold and transfer property. The trustee must exercise the powers granted in the trust agreement.
3. Requirements for Title Company: If the trustee holds title to property as part of the trust, the title company will typically require a certification of trust. This document includes various details such as the date of the trust instrument, identity of the trustor and trustee, powers of the trustee, and other relevant information.
4. Disclosure of Trust Provisions: While certain provisions of the trust may be considered private, the title company may require a copy of the trust. In such cases, any sensitive information, such as charitable donations, may be redacted.
5. Signing Authority: If there is more than one trustee, the trust document must specify whether all trustees are required to sign or if less than all can sign. Similarly, the trustee cannot grant a power of attorney unless specifically authorized by the trust.
6. Appointment of New Trustee: If all trustees have died or are unwilling to act, the trustor may appoint a new trustee if allowed by the trust provisions. Otherwise, the court may appoint a new trustee.
7. Acknowledgment of Signature: The signature of the trustee must be acknowledged by a notary public. The acknowledgment reflects that title is vested in the trustee, whether an individual or a corporation.
8. Deed Wording: The deed transferring title to the trustee should specify the trustee's role, such as "John Doe and Mary Doe, as trustees of the Doe family trust, under declaration of trust dated January 1, 1992."
9. Limitations on Trustee's Actions: The trustee's actions are limited by the provisions of the trust agreement. The trustee may only act within the terms of the trust, and any powers granted are subject to the trust's restrictions.

Understanding these requirements is essential for ensuring a smooth transfer of property to a living trust and obtaining the necessary title insurance coverage.