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Trusts work as an essential estate-planning mechanism to protect and distribute wealth over time. You, as the property owner, can even benefit from the protections of a trust during your life while letting it serve double-duty after your death.
Even though most people rely on an attorney to set up a trust , it can still be confusing to receive a bundle of paperwork and ‘congratulations’ on your new trust. One of the documents you might encounter, either in setting up the trust or in the course of administering it, is the certificate of trust.
A certificate of trust provides a short summary of the trust and identifying information that the settlor or the trustee can use to facilitate transactions on behalf of the trust. This document helps you navigate transactions for the trust without revealing all of the private terms in the trust agreement. In this guide, we’ll go into greater detail about the certificate of trust and whether you need one.
A certificate of trust is a short summary of the trust that provides basic identifying information about it in the form of an affidavit or certified statement. It typically contains the name of the settlor, the name and contact information of the acting trustee, and some statements regarding the powers of the trustee to act in a specific situation.
The certificate of trust doesn’t set out all of the terms and rules of the trust. Another document referred to as the trust instrument or trust agreement does that. Instead, the certificate can serve as the trustee’s proof of authority to act. It also helps people locate the existence of the trust and the trustee in charge of administering the trust.
Trustees rely on a certificate of trust rather than handing over the entire trust instrument for both clarity and privacy. Many of the people who might want to see a certificate of trust (like a bank setting up a trust account) have no interest in the nitty-gritty details of trust distributions and other rules. Providing the entire document would be cumbersome to the bank employees and a hassle for them to find the essential details they need to confirm the trustee’s identity and authority to act.
Second, trusts appeal to many people as wealth management or inheritance tools because of the privacy they provide, especially compared to simply distributing an estate via a will. While a will becomes a public document upon the death of a testator, a trust does not. Additionally, trust dispute actions in court typically stay under limited access to parties and attorneys, whereas a probate case is accessible to the general public.
If the trustee handed over the entire trust instrument every time they needed to prove their authority to act or to settle minor disagreements or questions about the trust, this privacy would quickly disappear. Most notably, the trust certificates do not include beneficiary identities or distribution terms.
There’s no set format for a certificate of trust, so its appearance will vary depending on who drafts it. Most people rely on an attorney to make a certificate of trust.
A certificate of trust can contain a variety of information and can be customized to meet the needs of a given situation. As a result, there’s no set form or format, but you can expect it to be typewritten and notarized.
The Uniform Trust Code acts as a model for trust terms that many states have adopted, and those who haven’t typically follow something similar. Those provisions require that a certificate of trust be signed by all trustees, state that the trust has not been revoked, modified, or amended to make the trust certificate inaccurate, and contain the following information:
Businesses and individuals commonly require a certificate of trust before entering into a contract with trust, like for the purchase of real estate or for a large goods and services purchase. The certificate of trust gives them confidence that they are dealing with someone with authority to contract on behalf of the trust.
Most states also have laws absolving people from liability if they act in reliance on the information in the certificate of trust and the contents later prove to be false.
Alternatively, someone who thinks they might be a beneficiary of the trust or have some claim against it might also request a certificate of trust. The certificate would give them the preliminary information they need to further pursue their claim.
While a certificate of trust performs some specific functions, like proving the trustee’s authority to act and confirming the existence of a trust, some people might use the term interchangeably with a trust registration statement.
In many states, you lodge a trust registration statement with the probate or district court serving the area where the trust is being administered. It typically contains less information than a certificate of trust, and it primarily acts to identify the existence of a trust and to direct people to the acting trustee.
As such, a trust registration statement usually includes the official name of the trust, the place where the trust documents are located or held, and the name and contact information of the trustee. As any of that information changes, the trustee can file an amended trust statement to keep the information updated.
While state laws typically require a trust registration statement, the absence of one doesn’t negate the existence or validity of a trust. You might find yourself looking for a trust registration statement if you believe you’re the beneficiary of a trust or have other reasons to look for a trust but lack anyone to contact.
Trust certificates are commonplace, so experienced trustees should be knowledgeable about having one made and when to make it available to others.
A generic certificate of trust should meet most of your needs when setting up and administering your trust. If you hire an attorney to create the trust, they often include a certificate as part of the trust creation passage. If they don’t, be sure to request one.
An experienced trustee might feel comfortable drafting a certificate of trust on their own. Each state’s laws concerning trusts detail the information that a certificate should have, so it is possible. In addition, some large institutions like national banks make fill-in-the-blank trust certificate forms available for their clients.
If you’re administering a trust and someone requests a certificate, you can also contact a local attorney specializing in trusts, wealth management, or estate planning to draft the certificate.
If you’re not related to the creation of a trust or the management of one, you might still need a certificate of trust before doing business with someone claiming to be a trustee of a trust.
In either of these scenarios, start by requesting the certificate of trust from the trustee. You can also ask the trustee to provide the portions of the trust instrument that designate the trustee or confer powers upon them.
When you first set up your trust, you’ll probably use your certificate of trust frequently. For example, each time you transfer assets into the trust, you’ll show the certificate to the institution holding the asset. Or, if you make the request in writing, you’ll attach the certificate with a short note requesting the property transfer.
If a bank employee or another person refuses to accept your certificate of trust, check your state laws to see if there are any consequences for someone failing to accept it. Many states, like California, make that recipient responsible for any monetary losses that result from their failure to accept it if the court determines that they did not act in good faith when demanding the trust instrument.
Whether you are reviewing the certificate of someone else’s trust or presenting one for your own, plan to rely on the certificate as an accurate representation of the existence of the trust and the scope of the trustee’s duties.
In most situations, the certificate of trust should eliminate the need for sharing the entire trust agreement. You might still need to provide excerpts of relevant trust sections that support the certificate, but greater conflicts that require the entire trust instrument typically end up in court.
To minimize costs to your trust or yourself, be aware of your state’s laws about assessing costs against the recipient of a trust certificate that refuses to accept the certificate and demands the entire trust agreement.
