Trusts in Real Estate Transactions

Brad Jones

Trusts have become a more common real estate holding tool, as people take a more aggressive approach to their estate planning. Trusts can be great tools for maintaining the privacy of personal finances and avoiding lengthy probate proceedings. Moving real property in and out of trust is typically no more complicated than recording a properly executed deed to or from the trustee of the trust. Selling property held in trust requires a bit more paperwork, but a skilled attorney should be able to easily guide clients through the additional documents required.

For many years, the standard practice in transactions involving trusts was for attorneys to request a copy of the governing trust document and review it carefully to verify the names of the currently acting trustees. The attorney would also verify those trustees had the authority to sell and convey the property in question. As times changed, so did the law, and versions of the Uniform Trust Code were enacted in both North Carolina and South Carolina. With the adoption of this Code came changes to how trust records could be disclosed to third parties.

Both North Carolina and South Carolina now allow good faith reliance on a trust certification document that recites a battery of relevant and important information about the trust and its trustees. The trust certification is a legal substitute for a review of the trust documents. Furthermore, a person who declines to accept a trust certification in lieu of the complete trust documents could be subject to liability and penalty from the trustees. The pertinent statutes shield those who rely, in good faith, on the trust certification by allowing them to enforce the representations made against the trust property. This “ignorance is bliss” approach may seem odd and prone to abuse, but it intends to protect the privacy of the trust instrument.

When you encounter a trust-held property in real estate, there are a few things to remember. First, a trust is a legal agreement to hold property for the benefit of named beneficiaries, and it is not an entity unto itself. It might be splitting of legal hairs, but a “trust” does not own property; the property is owned by the trustees, for the benefit of the trust beneficiaries. Any contract to sell or to convey property must be signed by the then acting trustees. A determination of the authorized trustees should be made through a trust certification instrument. Complete trust documentation should not be requested or demanded unless the requestor has reasonable doubt that the information provided in the trust information is incorrect.

Navigating through the requirements to convey property involving a trust can be complicated. If there are questions or concerns about how a trust may affect your transaction, contact an attorney at Black, Slaughter & Black, P.A., to assist you.