The Definition of a Certificate of Trust

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A person acting as trustee has legal control over a trust and the assets it holds. A certificate of trust is simply an abridged version of a trust; it gives entities information regarding the trust while keeping certain provisions private.

When doing personal business with financial institutions such as banks or lenders, they may ask for confirmation that the person acting on behalf of the trust actually controls its assets and has access to them. The certificate of trust verifies that this is indeed the case, and most institutions universally accept it in place of the entire trust document.

Defining the Meaning of Trustee

The trustee is a person appointed by a settlor, or trustor, to execute the terms of a trust in the distribution of its assets. The trust allows the owner of those assets to give someone else the right to hold them in the interest of the trustor or third parties. It also provides legal protection for trustors and their assets and ensures their proper, correct distribution via the trustee, who must carry out the trustor's wishes.

How trustees perform their responsibilities depends on the trust agreement and the type of assets contained in it. For example, a real estate trust requires the trustee to oversee the trustor's land. The trustee's role carries great responsibility – if the person named as a trustee is unsure of what to do or doesn't feel like they are up to task, they can get advice from a professional or step down to allow a more experienced person to take on the duties as outlined in the trust. As each situation involving a trust is different, trustees should consult with a lawyer or tax advisor if they have any questions.

What Is a Certificate of Trust?

A certificate of trust is simply a document that states that a trustor established a trust and trustee for their assets. It is also sometimes called an abstract of trust, memorandum or certification of trust. This exact term will depend on the state of issuance and applies to several kinds of trusts, including revocable and irrevocable trusts.

When someone creates a self-certified trust document, they do so by declaration of penalty of perjury. Its contents will vary with each state, but the certificate generally contains:

  • Identification of the acting trustee and their information. This person is in charge of moving, selling or giving away assets in a trust.
  • Details as to the trustee's powers.
  • Identification and address of the trustor.
  • Date of the trust's creation and any changes occurring from the beginning.
  • Information as to whether the trust is irrevocable or revocable. If it is revocable, the certificate will provide details as to who can revoke it.
  • Tax identification number of the trust.
  • If the trust assets relate to specific real estate, it should contain a legal description of the property.

Why Use a Certificate of Trust?

According to Lawyer Playbook, financial institutions often want critical information about a trust on file in order to update ownership details. A client can provide this information with a complete copy of the trust, but may not want to do that for several reasons. Trustors may want to keep some aspects regarding ownership of their assets or terms of the trust private. For example, if someone changes beneficiaries or other details on the trust, they may not want that information public.

Furthermore, some trust instruments are extensive; they can be almost a hundred pages in length. It is, therefore, easier to provide an institution with a simplified trust certificate document that contains only the most critical information. It will not list a person's beneficiaries, their inheritance or when they will receive that inheritance. A certificate of trust gives a financial institution just the basic facts of the trust.

Getting a Certificate of Trust

A person who needs a certificate of trust can create one or find a template online that suits their needs. Some financial institutions, such as escrow companies or brokerages, may have their own certificate of trust template form. An estate attorney who sets up trusts may also provide a form to those who request one.

No matter where they get the document, all acting trustees must sign it. A notary public must also sign the form, and some may provide certificate of trust forms:

  • American Automobile Association (AAA).
  • Banks and other financial institutions.
  • Courthouses.
  • Law firms.
  • Real estate offices.
  • Tax or accounting offices.
  • Copy shops.
  • Shipping st0res.
  • License and vehicle registration centers.
  • Universities and colleges.
  • Libraries.

According to the National Notary Association, some states allow for remote signing by a notary.

Certificate of Trust Laws

Each state has its own requirements regarding what constitutes a certificate of trust and usually lists them in its statutes. As long as the person follows the guidelines as instructed, the form will be legitimate, and the business entity must accept it in place of the actual trust. If it doesn't, it faces liability for any potential losses.

For example, California Probate Code Section 18100.5 enables some financial institutions to receive a certificate of trust instead of the whole, multi-page document. The state also allows the receiver of the document to rely on the information in it without liability, as long as they act in good faith. California also states that an entity that does not accept a valid certificate of trust and requires the whole document may face liability for monetary losses to the trust grantor.