§2.2 - Trusts-Creation of Interest

• Jurisdiction: Washington

§2.2 TRUSTSCREATION OF INTEREST

This section discusses the creation or acquisition of a trustee's interest in real property.

(1) Title held by trustee

A trustee may hold legal title to property for the benefit of another. The trustee's interest, however, does not entitle the trustee to any benefit or profit from the trust property. The beneficial equitable interest is in the beneficiary. Leslie v. Midgate Ctr., Inc., 72 Wn.2d 977, 436 P.2d 201 (1967).

The trustee has a duty to keep property separate from his or her own property and from property held under other trusts, and to earmark trust property as property of the trust. RESTATEMENT (SECOND) OF THE LAW OF TRUSTS §179 (1959).

Practice Tip: A deed conveying property to a person as trustee should clearly identify the transferee as "_________, as Trustee, or his/her/its successors" or "____________ as Trustee Under Trust Agreement (UTA) dated ________, or his/her/its successors."

Caveat: Only certain persons are authorized by statute to serve as trustees: suitable persons over the age of 18 years, trust companies regularly organized under the laws of the state of Washington and national banks when authorized, certain nonprofit corporations, if permitted by their articles or bylaws, and professional service corporations whose shareholders are exclusively attorneys. A for-profit corporation that is not authorized to act as a fiduciary may not serve as a trustee. RCW 11.36.021

(2) Formalities relating to transfer to trustee

This section discusses formalities related to transferring real property to an express, resulting, or constructive trust.

(a) Express trust

In 2011, effective as of January 1, 2012, Washington adopted significant revisions to its trust statutes, including provisions for creation of express trusts, RCW 11.98.008, and the requirements for trust creation, RCW 11.98.011. Except as required by statutes other than Title 11 RCW, a trust need not be evidenced by a trust instrument and may be created orally if its terms are established by clear, cogent, and convincing evidence. RCW 11.98.014.

An express trust has been defined as a contract that is "created by contract of the parties and intentionally." Farrell v. Mentzer, 102 Wash. 629, 632, 174 P. 482 (1918). Parole evidence is not admissible to establish an express trust. Id.

An express trust in real property must be in writing. RCW 19.36.010. In many cases, a written trust agreement or last will creates a trust. For a trust created by the trustor during life (an inter vivos trust), real property is conveyed by deed. See RCW 64.04.010 (conveyance of real estate or any interest therein shall be by deed); RCW 64.04.020 (deed shall be in writing, signed and acknowledged); Stocker v. Stocker, 74 Wn.App. 1, 871 P.2d 1095, review denied, 125 Wn.2d 1001 (1994).

Caveat: If real estate is transferred to a trust, title insurance coverage issues should be reviewed. Even though the grantor may remain the trustee and lifetime beneficiary of a trust, the trust may not be protected by the grantor's original title insurance policy. The coverage

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