Frequently Asked Questions

It is best to get this answered clearly and early. If the trust is validly placed on the deed, it belongs to the trust. The trust real estate asset manager has to see what the trust says about major property decisions, such as renting, sale, and repairs. If the trust gives the trustee discretion, you'll need to walk through their processes as part of the decision-making process.

Of course, ownership must be confirmed. Was the title document correct that transferred the property into the trust? Is the trust named correctly on the deed, and the trustee? Has an affidavit of change of trustee or an affidavit of death of trustee been recorded as might be appropriate? Has an attorney reviewed these documents?

As Brené Brown wrote in Dare To Lead, "Clear is kind." Grantors that provide for clear ownership and direction on real estate are being very kind to their trustees and beneficiaries.

Understanding a Trustee requires understanding a fiduciary. A fiduciary is an individual or entity that is entrusted to act on behalf of another party, known as the principal or beneficiary, with a legal and ethical obligation to act in the best interest of that other party.

The fiduciary relationship, as created by a legal agreement, involves acting in the best interest of another. It is a bundle of duties the fiduciary owes to the beneficiary. The following are some of these duties.

• A Duty of Loyalty is to act in the best interest of the beneficiary.
• A Duty of Care is to be cautious and reasonable with the beneficiary's assets.
• A Duty of Good Faith obligates the fiduciary to act transparently and ethically.
• A Duty of Confidentiality requires protecting the private interests of the beneficiary.
• A Duty of Account requires the fiduciary to keep detailed records of transactions and decisions.
• A Duty of Impartiality requires the fiduciary treat all beneficiaries fairly, without bias.
• A Duty to Act in Accordance with the Agreement keeps the fiduciary strictly within the bounds of the governing documents.

Trust real estate is therefore restricted in its operation and opportunity by the duties and obligations of a trustee. Real estate professionals that want to work with trustees will do well to notice that a trustee must consult with experts for multiple opinions and keep careful accounting of all decisions. This can necessarily make it more expensive, but the boon to management is worth every dollar.

Bank trustees use a process known as Pre-Acceptance Review to evaluate prospective fiduciary accounts. They evaluate whether they have the proper knowledge and systems to manage your family's trust account. It also lets the bank evaluate the risks associated with taking on the account, and of course, whether doing so would be profitable.

But the bank's pre-acceptance review is good for you too. You want your account to be a good fit. Here are a few of the areas of investigation:

• Account Mix. The bank adheres to modern portfolio theory. Diversity of account mix matters. Relative to real estate, an estimate of value up front determines whether the account will overweigh in one class. Corporate trustee real estate asset managers will work with their trust officer counterparts to determine how the trust-held real estate contributes to the account mix and whether the real estate held would need to be sold to balance the portfolio.
• Physical Condition. A visual inspection of the property is also conducted to verify such things as that in fact the property exists (yes, you heard that right), if the buildings or land are being cared for, or whether there are any environmental concerns on site like evidence of contamination or occupants that might be generators of pollutants.
• Title & Taxes. A preliminary look at titling and public data is conducted to confirm that the trust does in fact hold the real estate and that the property taxes have been paid.