At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker, the trustee (trust manager), and the trust beneficiary. Oftentimes, all three parties are represented by one person or a married couple. In the case of a revocable living trust, for example, a person may create a trust (the trust-maker or settlor) and name themselves the current trustees (trust managers) who manage the trust assets for their own benefit (trust beneficiary). Upon the death of a trustee, lets say a spouse, the trust will continue with the surviving spouse continuing as the trustee. In the case of a married couple, if both spouses die, management and control will pass to the named successor trustee. With assets properly funded into the trust, the property will pass to the trust beneficiaries upon the death of the trust maker.
A revocable trust is a useful device that serves property management functions during a settlor’s lifetime and after death. A revocable trust:
- avoids the costs and inconvenience of formal conservatorship proceedings in the event of the lifetime disability or incapacity of the settlor; and
- avoids probate or other court proceedings by providing long-term continuity of management of the settlor’s assets, uninterrupted by the settlor’s incapacity or death.
California institutions such as banks, lenders, and title companies have become so accustomed to dealing with trusts that the administration of a revocable trust during the settlor’s lifetime is relatively easy. Formerly, banks and other institutions were wary of dealing with trusts because of uncertainty over the powers of the trustees. California, however, has established a statutory form of certification of trust that provides protection for any institution relying on the certification. The statutory form is widely accepted and has led to standardization even among institutions that retain their own certificate of trust forms. The certification of trust provides a financial institution with documentation of the trustee’s powers. It also preserves the confidentiality of the dispositive terms of the trust that need not be disclosed in the certification. A certification of trust that relates to an interest in real property may be recorded in the office of the county recorder in the county in which the property is located. A successor trustee may execute and record an affidavit of change of trustee if title to an interest in property is affected by the change of trustee. The recordation establishes a presumption concerning the identity of the successor trustee.