Recording a Trust No Longer Required
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Spring 2003, Volume 2, Number 2
Recording a Trust No Longer Required
by Pamela Butler O'Brien, Underwriting Counsel
The New Trustee's Certificate Statute
Until G.L.c. 184 §35 was enacted recently, Massachusetts was one of the few states that required the entire trust document be recorded when real property was held in trust. See, G.L.c. 203 §§2 and 3. When dealing with trustees from California, New York or Florida, for instance, the trustees frequently presented Trustees Certificates and were shocked when Massachusetts' attorneys required the entire Trust be recorded. The objections primarily focused on the fact that many non-testamentary trusts are estate planning trusts and contain private financial information. Massachusetts' estate planners got creative and began to layer trusts in order to prevent that financial information from becoming a matter of public record. The customary result was real property owned by trustees of a nominee trust whose beneficiary was the financial planning trust. In order to remove some of the layers and come into line with the rest of the country, the probate and real estate bars lobbied hard for the passage of Ch. 508 of the Acts of 2002, creating G.L.c. 184 §35 and amending G.L.c. 203 §2 to accommodate the provisions of new Chapter 184 §35. The statute was signed on January 1, 2003, with an emergency preamble making it effective immediately.
The new statute applies only to non-testamentary trusts. A devise to a trustee of an inter vivos trust, familiarly known as a "pour over trust," is not a testamentary trust and does fall within the scope of §35. A testamentary trust is one wholly created in the will. Section 35 does not apply to testamentary trusts. This is a logical distinction since probate records are a part of record title and, therefore, a testamentary trust is "on record" and doesn't need the assistance of §35.
Section 35 provides that a trustee's certificate executed under penalties of perjury signed by a trustee of record stating the identity of the trustee or beneficiary; the authority of the trustee to act; and the existence or non-existence of any condition precedent to acts of the trustee which may be germane is binding on all trustees and the trust estate or other person relying in good faith on the certificate.
The new statute has some shortcomings. The certificate must be executed by "a trustee of record." How does one become a trustee of record? A deed to a named trustee is, of course, one way. A trustee's certificate by the trustee of record naming successor trustees is another way. Although the statute clearly states that the trustee must be named in the records of the registry of deeds or of the registry district of the land court and does not provide for a trustee named in a will, the MCA is promulgating a title standard which overcomes this shortfall in the statute. The MCA title standard provides that "Trustee of Record" shall include trustees, successor, and contingent trustees named in a will duly probated in MA. Since G.L.c, 183 §5B is a method of clarifying record title, under certain fact patterns it is possible that an attorney's affidavit may be a way of establishing a trustee of record when there is a gap in the succession of trustees. A major issue with the statute is how to handle the typical devise to "the then current trustees of" an inter vivos (pour over) trust. Fortunately, the estate planning bar is responding to the new statute by recommending that their typical clauses be changed to provide for named trustees.
A debate has arisen as to whether or not a trustee's certificate needs to be recorded at the time of a deed into the trustee or only when the trustee is taking some action, for example, mortgaging or conveying the title. It is the recommendation of Stewart Title Guaranty Company that it is advisable to record a trustee's certificate at the time of the original grant to the trustee. This certificate should, at a minimum, provide the name of the successor trustee(s). Naming the successor trustee(s) at that time will prevent future problems by establishing the successor trustee(s) "of record" prior to the time when a trustee's certificate under the new statute may be necessary for any given transaction in the event of the intervening death or disability of the original named trustee(s).
As a final caveat, the Land Court has not yet produced its requirements for trustees certificate. There has been some indication that the Land Court will require a recitation as to the termination date of the trust even though that is not required by or specifically recited in the statute. Until the Land Court provides their official guidelines, I would recommend that any trustee's certificate regarding registered land be presented to the Land Court Registry District recorders for approval prior to having it executed by the trustee(s).