Be careful with trust information

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Trusts are routine estate plan vehicles used for many reasons. They are used to identify how assets, which are held in a trust for specific purposes in the near and distant future, are to be used for specific beneficiaries. Trusts also are created to be private, and to avoid processing assets through the probate court.

Trust agreements are made between the person creating the trust — the settlor — and the person who serves as the trust’s fiduciary — the trustee. Generally, the settlor is also the first trustee. When assets are deposited into a trust, the trust becomes the owner of the assets.

Because a trust agreement is a private document, a settlor/trustee should not give a copy of a trust document to anyone except as specifically required. Court officials may require that a trust be delivered to them if it is subject to a court’s review. A qualified beneficiary also may ask for a copy of a trust. In the latter circumstance, the beneficiary’s access to a copy of the trust may also be limited.

A problem occasionally arises when you want to open an account in the name of the trust at a bank, brokerage or investment firm. The institution may request a copy of the trust. In this instance, we do not recommend turning over a copy of your private trust agreement, but rather giving the institution a copy of the signed Certificate of Trust Existence and Authority.

At the time you signed your estate plan, you signed documents, such as a will, power of attorney, health care directive, and a Certificate of Trust Existence and Authority, among others.

The Certificate of Trust Existence and Authority is the settlor, trustee or your lawyer’s affidavit representing as true certain relevant provisions of the trust agreement. The Certificate of Trust Existence and Authority is important because this document outlines the trustee’s authority to act, sign documents on behalf of the trust, to transfer ownership of assets and other relevant tasks associated with the trust. For instance, if a trust is transferring title to real estate, a copy of the Certificate of Trust Existence and Authority will be recorded along with the deed. Likewise, providing the Certificate of Trust Existence and Authority is customary and expected at the time an account is opened in the name of the trust.

The Certificate of Trust Existence and Authority provides the recipient with the following information:

  • The name and date of the trust
  • The name and address of each current trustee or co-trustee
  • The powers and authority of the trustee(s)
  • A copy of the signature page and the first page of the trust agreement

The Certificate of Trust Existence and Authority does not include your directions regarding how and when trust distributions are to be made and to whom.

Upon receipt of the Certificate of Trust Existence and Authority, the institution may rely on it regardless of whether it includes wrong information. The institution has authority to enforce the transaction in reliance on the authenticity of the certificate.

Sometimes, an institution may provide you with a copy of its Certificate of Trust Existence and Authority form. If you receive this form, please review it carefully before signing it.

Additionally, institutions should beware that the Michigan statute governing the Certificate of Trust Existence and Authority goes a step further to provide that if they demand a copy of the trust agreement, the institution may be liable for damages, costs, expenses and legal fees if a court determines that the person who made the demand had no right to do so.

Sharan Lee Levine is a partner at Kalamazoo-based Levine & Levine Attorneys at Law. She has more than 40 years of experience in all aspects of corporate compliance, business formation, business succession planning and probate, and estate planning and trust administration.

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