Table of Contents
Table of Contents
Once you set up a trust, a trustee then manages the fund on behalf of your beneficiaries. At times, the trustee may need to provide proof both about their role as well as about the assets in the fund. A certificate of trust allows your trustee to present this required information as needed while keeping other details private. Here's how a certificate of trust works and when one could be helpful.
What Is a Certificate of Trust?
A certificate summarizes details from a trust document that might be needed for financial institutions. Think of it as akin to a brief executive summary.
The certificate of trust might include information such as proof that the trust exists and information on the assets held by the trust. It also shows who the trustee is and their rights to manage the property on behalf of your beneficiaries. The trustee can present the certificate, instead of the entire trust document, as verification to banks, lenders and other financial institutions.
Do All Trusts Need a Certificate?
No, trusts do not need a certificate. A certificate is an optional document that the trustee can present to financial institutions instead of the entire trust document. If your trust does not have a certificate, your trustee could use the trust document instead.
With that in mind, setting up a certificate helps protect the privacy of your trust instructions. Setting one up is simple and may even be included when you create a trust.
How Does a Certificate of Trust Work?
A certification of trust works by summarizing key information from your trust documents in the following steps:
- You must officially create a trust, including the trust document.
- You write a trust certificate listing information your trustee might need to present to a financial institution.
With this document, the trustee shows they have the authority to make transactions for the trust on behalf of your beneficiaries. For example, say the trustee determines they need to take out a loan for your beneficiaries, and they want to use a piece of real estate in the trust as collateral. The lender would require proof that the real estate exists and that the trust holds title to it. The trustee could show the certificate to the lender and avoid sharing unnecessary details about the trust and your beneficiaries.
The trustee may also need to show the document to access accounts. For example, a bank might need to see the certificate before allowing the trustee to withdraw cash to cover bills for your beneficiaries.
What Is in a Trust Certificate?
The details included in a certificate will depend on the requirements of your state and financial institution. Some standard pieces of information include:
- The name of the trust
- The trust's tax identification number
- Your name as the creator/grantor of the trust
- The trustee managing the trust
- The trustee's powers, such as whether they are allowed to withdraw cash from trust accounts
- Whether there is a backup/successor trustee
- The titles to trust assets
- Whether the trust is revocable or irrevocable
Who Completes a Certificate of Trust?
The grantor/creator of a trust completes a certificate of trust. Your trustee can then present this document to prove they are empowered to make transactions, ones such as taking loans against property in the trust to benefit your beneficiaries. If you hired an attorney to create your trust, they could also sign the certificate for your trustee.
Does a Trust Certificate Need to Be Recorded?
A trust certificate may need to be recorded if the trust holds title to real estate. In that case you would likely need to record the certificate with any local county office where the properties are located. That way, they have the necessary information if the trust sells the properties. If your trust doesn't hold real estate, the certificate might not need to be recorded. It depends on your state's rules.
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Why Is a Certificate of Trust Important?
A trust certificate is important for protecting your privacy. When you set up a trust, you might not want other people, such as bank employees, to know who you set the trust up for or the instructions for distributing the assets over time. With a certificate, your trustee can make financial transactions while keeping such details private.
A certificate of trust is also important for convenience and efficiency. It allows your trustee to have a more straightforward document to show others what they can do with the assets in the trust. This may help avoid confusion and mistakes.
What Are the Benefits of Having a Certificate of Trust?
Privacy
Privacy is a key reason for setting up a trust. You're not required to make a public record of giving property to beneficiaries, something that would be required if you transferred property through your will and a probate court. If your trustee uses the full trust document for financial transactions, they would reveal these private instructions each time. With a certificate, your trustee only shows the necessary information while keeping most details confidential.
Convenience
A certificate gives your trustee a short, simple document to show financial institutions, attorneys and others as part of their work managing the trust. They can then store your official trust documents in a private, secure location.
Clarity
A trust certificate gets right to the point about who you picked as trustee and what authority they have to manage the trust. This helps clarify your instructions and avoid confusion when the trustee goes to make transactions for your beneficiaries.
When Should You Get a Certificate of Trust?
You may want to get a certificate if it's important to you to keep the information in your trust private. You might not want others to know how much money is going to your beneficiaries and when. With a certificate, your trustee will not have to reveal this information for some transactions.
A certificate may also make sense if you have a more complicated trust, such as one with many different beneficiaries, a long list of assets or complex instructions. A certificate gets right down to the necessary details.
On the other hand, if you have a relatively simple trust and are less concerned about privacy, you might not need this document. After all, the trustee would only be presenting information to financial institutions and other professionals. Your trust details still wouldn't be shared with the general public.
With that being said, it's usually quick and inexpensive to set up a certificate. Estate planning services may even include this document as part of creating your trust. If you're unsure whether you need a certificate, it may still be worth setting one up for convenience.
How to Obtain a Trust Certificate
1. Write Up the Certificate
You first need to set up a trust to obtain a trust certificate. You may want to work with an estate planning attorney to do so. There are also online estate planning services and software tools you can use to set up a trust.
While creating the trust, ask the provider if they can give you a certificate. Some include it as part of their fee for creating a trust.
If you already have an existing trust, you can give the trust document to an estate planning attorney or service. They will review the document to gather the information for the certificate. Keep in mind that your state may have a specific form you must use to satisfy the necessary requirements.
2. Make the Document Official
Once the certificate is written, you must have it notarized. You can use a public notary. Then you'll need to sign the document as the trust creator/grantor.
The state you live in may have different rules for certificates of trust. For example, you may need to include specific information for it to be valid. You may also need to register the document with your local county office if the trust holds the title to real property such as real estate. Consult with a legal professional who is familiar with your local rules as part of creating your document.
3. Updating Your Certificate
If you make any changes to your trust, you must create a new certificate. Some financial institutions require this document to be renewed every year or two.
Planning Ahead
Your beneficiaries could be relying on your trust assets for years after you've passed away. By then, they can't ask you to clarify details or approve transactions. By setting up a certificate, you help protect the privacy of your trust document while making instructions more straightforward for your trustee. As part of this significant estate planning decision, consider speaking with a financial professional and an attorney to help ensure your documents are in order.
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