By Attorney Nicholas Thalheimer
Generally, when declarations of trusts are recorded at the Registry of Deeds, the trust document will identify and name successor trustees. However, some trust documents do not name successor trustees. This becomes problematic when the original trustee(s) of the trust passes away and there is no successor trustee named or appointed either by the deceased trustee, while they are still living, or in the body of the trust document itself. In circumstances where a trust is unrecorded, the only evidence of the existence of the trust may be a recorded Certificate of Trust, which is acceptable. However, if the trustee is deceased and there is nothing of record signed by the original trustee(s) in the form of a certificate naming, or identifying, successor trustees effectively the trust has no trustee of record.
For example, when an unidentified successor trustee alleges that he or she is the successor trustee and attempts to convey, or take other actions related to, real estate owned by the trust, there is a question of whether he or she is truly the successor trustee. This is commonly referred to as the “Stranger to Title” issue, meaning that simply recording a self-serving trustee certificate executed by that successor trustee is not sufficient to evidence that he or she is, in fact, the successor trustee. This raises a question as to true ownership of the property and authority of the successor trustee to act.
In this example, without recorded evidence of a named successor, being appointed so by the current trustee of record, or by the beneficiaries of the trust (if the terms of the declaration of trust allows for this), there is no way of confirming legitimacy of the person claiming to be a successor trustee. Without clear evidence identifying a successor trustee, anyone could claim to be a trustee and attempt to convey the trust property.
Trust Attorneys who draft these documents commonly argue that identification of a successor trustee doesn’t need to be recorded. However, from a title insurance perspective, there must be a valid written instrument in the chain of title that evidence a successor trustee.
Another common problem we often encounter are trustee deeds for consideration of a dollar or some other nominal consideration. Property of a trust cannot be conveyed for nominal consideration. Title insurance companies view this as a possible breach of fiduciary duty. Often you have to look to the body of the trust to determine whether or not a trustee has the power to gift or whether or not they have the ability to make nominal gifts or convey for nominal consideration because they are, in fact, as trustees, fiduciaries for the beneficiaries.
Luckily, there are solutions to these issues. An affidavit of the attorney who drafted the trust can be recorded along with the applicable provisions of the trust to prove the identity of the trustee and their enumerated powers or authority. Oftentimes the alleged successor trustee does not have the original trust or a copy of it. However, if the attorney who drafted trust has a copy, that copy or select provisions of it, along with an affidavit stating the identity of a successor trustee can be recorded.
If there is a successor trustee, the trust, itself, should contain language about how to appoint a successor trustee. Usually, the process is left to the direction of the beneficiaries. But this can be an issue as well where there is no clear identification of the beneficiaries. Most trusts are drafted with a reference to a schedule of beneficiaries. However, that schedule of beneficiaries is not usually recorded. The same attorney that drafted the trust or the original trustees may, have the schedule of beneficiaries.
Under that set of circumstances, the issue can sometimes be resolved by recording a document supporting the alleged successor trustee’s assertion that he or she is, in fact, the successor trustee. It all depends on the language of the trust.
The bottom line is that, as conveyancing attorneys, we have to rely on what is recorded in the chain of title to determine who the record owner is and what powers they have, or may not have. In cases where the property is held in trust, we cannot rely on self-serving statements of alleged successor trustees. This is the case whether the trust is recorded or not. We must a see a clear nexus between the purported trustee and the trust. And if a conveyance is made by the trustee for nominal consideration their power to do so must be clearly stated in the recorded title. Few trusts contain provisions for gifting or transferring title for nominal consideration and it is usually limited to estate planning or inter-family transfers.