Trustees, trust officers, and trust real estate asset managers breathe a deep, audible sigh of relief when a family member or beneficiary comes into the relationship saying, “Look, although this property has been in my family for generations, I know it’s not mine. In fact, I know it doesn’t belong to any of us. It belongs to the trust.” This is one mark of an astute beneficiary, and quite possibly evidence of great generational wealth education.
There’s a bit of a professional expectation that family members and beneficiaries have not been instructed into proper expectations of trust administration. As it relates to real estate, the conversation starts on the opposite foot, and a trustee or trust officer needs to do the critical, sometimes challenging, work of instructing beneficiaries of their role and rights with respect to the properties.
A beneficiary might meet the trust asset manager at the property and say, “I’m glad we could meet so I can show you around our property.” The asset manager might hold his tongue, not seeing the need to be too formal in pursuing clarification of the beneficiary’s use of the term “our.” The conversation continues as they walk the property.
“This is where we rode horses when we were kids,” the beneficiary says, pointing to a fenced field next to the house. “And that’s where we shot our BB guns,” she continues, leading the trust asset manager around the back side of the detached garage. “Mom got so mad at Dad for letting us do that!” You smile, and hear a car pulling up the gravel drive.
“Oh!” the beneficiary exclaims. “There’s Roger. He’s our family real estate agent. He’s going to be the one to sell this property.”
The trust asset manager cringes. Maybe it’s better to have the conversation now, before the real estate agent is there.
“So, I don’t want there to be any surprises for you and the agent” the trust asset manager begins. “There’s a process we follow to do proper due diligence in selecting a real estate agent to sell the home during this estate settlement. I can’t promise that we will use the family agent.”
“What do you mean?” the beneficiary asks, stopping in her tracks. “This is our property, and we’re going to use our agent.”
“Well, actually,” the trust asset manager begins delicately, “it’s not your property. It’s the trust’s property. I’ll have to see what the trust says about the sale of the property, and whether is says anything about how the agent is chosen. If the trust gives the trustee discretion, we’ll need to walk through our processes, and perform due diligence on this and other agents, the sale package and process, and the like.”
“What do you mean it’s not our property? I was raised here. I rode horses here. I shot BB guns here.”
“I understand,” says the trust real estate asset manager, “but it’s the trust that’s on the grant deed. And the trust company I work for is the named trustee. We have to follow the trust, because the trust is the owner.”
As a grantor drafting a trust it’s a good idea to take a second look on how real estate held by the trust will be managed by the trustee. Trustees administering a trust must take time to evaluate the ownership of real estate held in the trust, and what provisions and authorities are provided for selling, operating, managing, or buying real estate in the trust.
And, 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.