The Grubb Company Offers Tips on How to Receive Holding Title

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What buyers need to know about holding title can make or break a sale.

Holding title in a revocable living trust offers several advantages, starting with the avoidance of probate costs and delays. Unlike wills, which become part of the public probate file, living trust terms remain private. And, it is difficult to challenge a properly executed living trust in court... as opposed to will challenges by disgruntled relatives.

Bob Belzer, attorney and vice president of The Grubb Company, says that holding title in a trust “has become more popular in recent years because it allows you to provide for the orderly disposition of your property without the need for probate.”

Things can get tricky with holding titles, but that are certain confirmations and processes one must go through in order to make it effective.

“Title to the property is held in the name of the trustees, not in the name of the trust, e.g., ‘John Smith and Mary Smith, Trustees of the John Smith and Mary Smith Family Trust.’ When you are selling or refinancing the property the title company will need to confirm details about the trust to make certain that the people signing the deed or loan documents and escrow instructions are authorized by the trust to do so,” Belzer said.

An increasing number of escrows involve title held in living or family trusts and require additional documentation:

  • Certification of Trust
  • Complete copy of the trust agreement and any amendments if the original trustee(s) is/are deceased or incapacitated
  • Certified copy of the death certificate if the trustee is no longer living

Because proceeds cannot be paid to individuals and will be distributed directly to the trust, the seller(s) will need to have a bank account set up in the name of the trust. If the buyer is obtaining financing for the purchase, they will need to inquire with their lender to confirm that holding title in the trust will not be an issue for the bank and the purchaser will need to complete a trust certification prior to the close of escrow. Because most trusts do not allow for a Power of Attorney, the company will need to review a copy of the trust agreement to determine if a POA can be used.

While there are no serious drawbacks to living trusts, there are some important caveats:
1. The attorney must prepare the trust, appointing as the initial trustee and beneficiary, with alternate or successor trustees named.
2. Each real estate asset and major personal property, such as car, bank accounts, mutual funds and common stocks, must be conveyed from its present ownership into the living trust. This is critical. It does no good to create a living trust and fail to follow through by not transferring major assets into the trust. Creditors can attach assets in a living trust before the beneficiary dies... but not afterward.
3. When refinancing a mortgage, some lenders still require the property title be taken out of the living trust so the new mortgage can be recorded before putting title back in the living trust. Enlightened mortgage lenders realize the trustor, beneficiary and trustee are the same person who can bind the living trust assets.
4. Assets left to a surviving spouse in a living trust are generally structured to pass free of federal estate tax.
The advantages of holding title in a living trust far outweigh any disadvantages.

“The investigation of the current ‘vesting’ of a property is a major part of our Listing Protocol before we put a home on the market,” President of The Grubb Company, DJ Grubb, said. “This technical study is why we maintain and offer in-house legal counsel.”

Please call or email with comments or questions regarding this topic, which is for informational purposes only and should not be construed as legal advice. Please contact a personal attorney to determine the best way to hold title.

For more information about The Grubb Company, please visit http://www.grubbco.com.

About the company:
The Grubb Company is a full-service real estate firm, offering their clients a smooth and professional real estate experience. With more than 44 years in the business, The Grubb Company knows that a high level of service ensures the satisfaction of their clients. They have a foundation of discipline, accountability and teamwork that sets them apart from other real estate firms in the area. The Grubb Company is committed to providing their clients with the best agents, the best service and the best houses around. To learn more, visit their website at http://www.grubbco.com/.

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Susan Kline