Correct Vesting of Title to Real Property Involving Trusts (Tennessee)

It is not uncommon in our daily practice of real estate closings to come across real property owned in the name of a trust, or more correctly, in the name of a trustee of a trust. You may recall from your real estate licensing course that a trust is a legal arrangement whereby a trustee holds property given to him by a trustor (or grantor) for the benefit of a different person named a beneficiary. And you may run across this yourself when listing or selling real property. What you may not know, though, is that Tennessee law does not recognize the trust itself as a separate legal entity, and therefore, it cannot hold title to property. Instead, property is to be held in the name of the trustee(s) of the trust.

This can trip a real estate transaction when there has been sloppy drafting on a prior deed in the chain of title. For instance, if the current deed shows "The Smith Family Trust" as the grantee (i.e. buyer), there is a question of whether title was actually conveyed to anyone since the "The Smith Family Trust" is not a legally recognized entity. Title insurers generally want this situation corrected by the execution and filing of a correction deed, showing the proper grantee as "John Smith, Trustee of the Smith Family Trust."

To avoid last minute problems in this area, it helps for you to ask about the current ownership of listed property - Is it owned by one person? More than one person? In his individual capacity? As trustee? And as always, please don't hesitate to contact your Realty Title representative to help navigate you and your clients through these issues. We'll review this issue from the Mississippi perspective in our next tip.

Please click here to print this tip: http://db.tt/JbaRpiqA