Trusts come in several different forms (e.g. Inter-vivos, Testamentary, Business, etc.). The type we most often encounter in commercial title is the Inter-vivos or living trust. A trust is established by a Trust Agreement, which is a legal document drafted for the purposes of determining what happens to a particular piece of property. A trust agreement is typically used as a vehicle to avoid probate. So instead of a court determining who gets your real estate when you die, the trust agreement would spell out the terms of who gets the property when you die.
What we usually try to do when we encounter a trust in a transaction is to obtain a copy of the trust documents well in advance of closing so we can review them to make sure we have all the evidence and documentation we need to close and record.
County recorders and registrars of title often won’t accept trust documents unless they’re recorded appropriately. So it’s very helpful for us to review those prior to closing.
Often parties are reluctant to share their trust agreement with anyone not directly involved in the agreement. The title company can often struggle to obtain the document. However, it is important that the title company is able to review a complete copy of the trust agreement because there is often direction as to successor trustees or how property conveyances are to take place, who has the authority to act, etc.
There are also trusts called testamentary trusts that we encounter occasionally. These are created by a will when someone dies. The will itself could operate as the trust agreement. In that circumstance we can either take the will as the trust agreement itself or we may be able to accept a certificate of trust in place of the will. It’s really dependent upon the circumstances.
If the property is Torrens, the documents will have to be reviewed and approved in advance of the closing and recording. It’s important to have these prepared early on in the process. If your title company is asking for them in advance of closing, that tends to be the reason.