A trust may be defined as a fiduciary relationship in which one person holds interest subject to an equitable obligation to keep or use that interest for the benefit of another and generally comprised of the following elements:
1. A settlor or “trustor”
2. One or more trustees
3. One or more beneficiaries
4. The agreement giving the trustee certain powers, and
5. Property which is the subject of the trust.
Trusts may be created in different ways: “living trusts” or “inter vivos trusts” are created by living persons conveying property to a trustee. “Testamentary trusts” are created by wills wherein a decedent’s will appoints a trustee to administer the assets of the estate following his death.
At common law, a trust is not a legal entity capable of holding title or dealing with it in any way. For example, deeds conveyed to the “John Doe Trust” are generally not valid conveyances according to the common law rule. The deed should have been conveyed into the trustee in that capacity: e.g., James Doe, Trustee of the [John Doe Trust].
When insuring title to property being acquired, conveyed, or encumbered by a trust, the trust document must be reviewed to ascertain that it is a valid and active trust and that the action taken by the trustee is within the scope of authorized powers conveyed upon him by the trust.
Property conveyed to an individual, corporation, or partnership with the wording “trustee” or “as trustee” , and with no other reference made to a specific trust, beneficiary, or the granting of powers may, depending upon applicable state law, be viewed as having been conveyed to such individual, corporation, or partnership individually and not as trustee. The act of placing the wording “trustee” or “as trustee” should not be construed as automatically creating a trust, especially in those cases where any other reference to such trust is clearly absent.
In modern jurisprudence many states have now enacted statutes which allow trusts to hold title in the trust name. In those states a conveyance to “The John Doe Trust” is considered valid. In most states this authority is concurrent with the common law method so either concept is considered valid. Some states require that certification by affidavit of the trust name, the name and address of the trustee and other relevant information must be recorded for a conveyance to the trust name to be valid.