When property is held in a trust estate, the appointed trustee generally holds title as representative of the trust for the benefit of the beneficiaries, not individually. If an acting trustee dies, resigns, is removed or becomes incapacitated, the trust agreement should have named an alternate or successor trustee to step into his shoes. A deeded conveyance is generally not necessary to remove a resigning trustee and replace her with a successor. If the property is being removed from the trust estate completely, however, a trustee’s deed may be needed.
File a current declaration of trust or affidavit of change of trustee, depending on your state, in the appropriate office in the county where the deed is recorded and the property lies. This declaration or affidavit should set out the details regarding the change of acting trustees so that any title search will reveal the new information. Although this doesn’t actually remove an existing trustee from the deed itself, it clarifies the record as to the replacement of the currently acting trustee. Removal of the original trustee from title occurs when the trustee is no longer authorized to act on behalf of the trust. Often when property is conveyed to the trust, deeds will recite that property is being conveyed to the named trustee and her successors, i.e. “John Doe, as Trustee of the John and Mary Doe Trust, or his successor trustee(s)”, so that when John Doe is no longer authorized to act, it is clear that title remains with the successor trustee for the benefit of the trust.
Read More: Who Can Sign a Deed Transferring Property Owned by a Trust for the Trustee?
Instruct the trustee to deed the property to you individually if you are the settlor, or creator, of the trust and have the authority to direct the actions of the trustee. Often if the property in the deed is to be mortgaged, a lender will require that an individual hold title to the property at the time the mortgage is made. After the mortgage is made, however, amend the trust and appoint an alternate or successor trustee before deeding the property back to the trust if desired. This will effectively remove the original trustee and replace her with the alternate. Check with your lender or attorney to make sure that a reconveyance to the trust will not activate a due-on-sale clause under the mortgage.
Instruct the trustee to deed property to a third-party purchaser. Depending on the terms of the trust, this may be within the powers of the settlor or beneficiaries and may be accomplished if the trust is revocable by the settlor. If funds are needed to make authorized cash disbursements to beneficiaries under the trust agreement, the trustee may sell the property and convert the trust asset to cash. This sale of the property removes the trustee as title-holder and the real estate from the trust.
Discuss any tax and legal consequences with your accountant and attorney prior to removing property from your trust.
The powers granted the trustees and settlors under a trust agreement may vary greatly from one trust to another. Make sure any actions taken by you are authorized under the terms of the agreement.
If a trust is irrevocable, a settlor may not be authorized to amend the trust or authorize removal of property.
- Living Trust Network: Selecting Trustees
- The Law Offices of Mitchell S. Ostwald: Revocable Living Trusts
- The Mamola Law Firm: Trust Administration by the Successor Trustee
- The Title Underwriter: Trusts and Trustees
- Law Offices of Rich O’Brien, PLLC: Transferring Home Out from Trust
- Living Trust Network: Transferring Real Property to a Living Trust
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