Trustees and Trusteeship

A trustee is an individual or entity appointed to manage and hold legal title to property or assets for the benefit of another party, known as the beneficiary. Trustees are often appointed through legal instruments such as wills, trust agreements, or court orders. In the context of real estate, trustees may hold, sell, lease, or manage property on behalf of beneficiaries according to the terms outlined in the trust agreement.

Trustees have a fiduciary duty to act in the best interests of the beneficiaries. This means they must exercise reasonable care, loyalty, and diligence in managing the trust property. Any action taken by a trustee should comply with the terms of the trust document and applicable laws.

Types of Trusts in Real Estate

Trusts are commonly used in real estate for various purposes, including estate planning, asset protection, and property management. Some common types include:

Living Trusts: Created during the grantor’s lifetime to manage assets, including real estate, for beneficiaries.
Testamentary Trusts: Established through a will and activated upon the grantor’s death.
Real Estate Investment Trusts (REITs): Companies that own, operate, or finance income-producing real estate, offering investors a way to earn returns without directly owning property.
Land Trusts: Often used for privacy or to separate property ownership from personal liability.

Trustee Powers and Responsibilities

A trustee's responsibilities are outlined in the trust agreement and typically include:

Managing and maintaining trust property.
Leasing or selling real estate as directed by the trust.
Distributing income or proceeds to beneficiaries.
Keeping accurate records and providing regular reports.
Acting impartially in the interests of all beneficiaries.

Trustees may be individuals, corporations, or legal professionals. When representing a client dealing with a trustee, real estate professionals must ensure that the trustee has the legal authority to act on behalf of the trust.

Verification and Due Diligence

Real estate professionals must conduct proper due diligence when dealing with trustees. This includes:

Reviewing the trust agreement to confirm the trustee’s authority and any limitations.
Verifying the identity of the trustee through legal documentation.
Confirming that the trustee is acting in accordance with the terms of the trust.
Conducting a title search to ensure the trust is the legal owner of the property.

Additionally, trustees may be required to provide a Certificate of Trust or a Trustee’s Declaration as evidence of their authority to act on behalf of the trust.

Trusts and Real Estate Transactions

When trustees engage in real estate transactions, specific language is often required in contracts to clarify their role. The trustee signs documents in their official capacity using wording like:

"[Trustee Name], as Trustee of the [Trust Name]"

It is also essential for real estate professionals to ensure that any transaction complies with provincial laws and trust regulations. If there are concerns about the trustee's authority or the legitimacy of the trust, legal counsel may be necessary.

Money Laundering Risks

Similar to corporations, trusts can pose risks for money laundering. Criminals may use trusts to conceal the identity of the true property owner. Under federal anti-money laundering regulations, real estate professionals are required to:

Verify the existence of the trust.
Identify and verify the trustee and, where applicable, the beneficiaries.
Maintain records of all relevant information and report suspicious activities.

By conducting thorough due diligence and seeking clarification when necessary, real estate professionals can ensure legal and ethical transactions when dealing with trustees and trusts.

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