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Living Trusts
Estate planners often recommend
"Living Trusts" as a viable option when contemplating the manner in which to
hold title to real property. When a property is held in a Living Trust,
title
companies have particular requirements to facilitate the transaction. While
not comprehensive, following are answers to many commonly asked questions.
If you have questions that are not answered below, your title company
representative may be able to assist you, however, one may wish to seek
legal counsel.
Who are the parties to a Trust?
A typical trust is the Family Trust in which the Husband and Wife are the
Trustees and, with their children, the Beneficiaries. Those who establish
the trust and transfer their property into it are known as Trustors or
Settlors. The settlor's usually appoint themselves as Trustees and they are
the primary beneficiaries during their lifetime. After their passing, their
children and grandchildren usually become the primary beneficiaries if the
trust is to survive, or the beneficiaries receive distributions directly
from the trust if it is to close out.
What is a Living Trust?
Sometimes called an Inter-vivos Trust, the Living Trust is created during
the lifetime of the Settlors (as opposed to being created by their Wills
after death) and usually terminates after they die and the body of the Trust
is distributed to their beneficiaries.
Can a Trust hold title to Real Property?
No; the Trustee holds the property on behalf of the Trust.
Is a Trust the best way to hold my property?
Only your attorney or accountant can answer the question; some common
reasons for holding property in a Trust are to minimize or postpone death
taxes, to avoid a time consuming probate, and to shield property from attack
by certain unsecured creditors.
What taxes can I avoid by putting my property in trust?
Married persons can usually exempt a significant part of their assets from
taxation and may postpone taxes after the first of them to die passes. You
should check with your attorney or accountant before taking any action.
Can I homestead property which is held in a Trust?
Yes, if the property otherwise qualifies.
Can a Trustee borrow money against the property?
A Trustee can take any action permitted by the terms of the Trust, and the
typical Trust Agreement does give the Trustee the authority to borrow and
encumber real property. However, not all lenders will lend on a property
held in trust, so check with your lender first.
Can Someone else hold title for me "in trust?"
Some people who do not wish their names to show as titleholders make private
arrangements with a third party Trustee; however, such an arrangement may be
illegal, and is always inadvisable because the Trustee of record is the only
one who is empowered to convey, or borrow against, the property, and a Title
Insurer cannot protect you from a Trustee who is not acting in accordance
with your wishes despite the existence of a private agreement you have with
the Trustee.
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