Understanding Living Trusts in California Real Estate

Estate planners often recommend Living Trusts as a viable option for holding title to real property in California. When property is held in a living trust, title companies have specific requirements to facilitate any transaction involving that property. Understanding these requirements in advance helps avoid delays at closing.

The parties to a trust include the Trustor (or Settlor) — the person who establishes the trust and transfers property into it; the Trustee — the person or entity responsible for managing trust assets; and the Beneficiary — those who benefit from the trust. In a typical Family Trust, the husband and wife are both the Trustees and, along with their children, the Beneficiaries. The settlors usually appoint themselves as initial Trustees.

A trust itself cannot hold title to real property — the Trustee holds property on behalf of the trust. Title would be worded: 'John Doe and Mary Doe, as Trustees of the Doe Family Trust, under declaration of trust deed dated January 1, 2016.' A Trustee can take any action permitted by the terms of the trust, and typical trust agreements do give the Trustee authority to borrow and encumber real property. However, not all lenders will lend on property held in trust — check with your lender first.

When a Trustee/Trustor dies, the trust agreement indicates who is authorized to sign going forward. Required documentation includes: a certified death certificate, an affidavit of death of trustee, a full copy of the trust agreement with all amendments, and a trust certification completed by the current trustees. A Trustee can only give someone a power of attorney if the trust specifically provides for it. If there is more than one Trustee, the trust must specifically provide for fewer than all to sign.

Important cautions: Private arrangements with a third-party trustee (where someone holds title 'in trust' for you informally) may be illegal and are always inadvisable. The Trustee of record is the only person empowered to convey or borrow against the property, and a title insurer cannot protect you from a Trustee acting contrary to a private agreement. The title company requires a full, unredacted copy of the trust — though financial amounts may be blacked out, no pages may be omitted.

Team Goeglein at Fidelity National Title reviews trust documentation on every applicable transaction in the South Bay and Westside LA. Matt Goeglein and Xavier de la Piedra IV work directly with trust attorneys to ensure all requirements are met well before closing.