Certification of Trust: Protecting Your Living Trust’s Confidential Information

I have helped many of my clients develop comprehensive estate plans that include revocable inter vivos trusts, often referred to as “living trusts.” A “living trust” is a legal document that allows a person to distribute their possessions and assets to the people they want to after they die. A living trust “owns” the property transferred to it, while still allowing the owner to maintain control. Most types of assets or property can be transferred into the ownership of a living trust, if those assets have value. For example, if my clients own a home, I help them prepare a deed to transfer the ownership of the house into the name of the trust. I also prepare a general assignment of personal property to the trust, so that all my client’s “stuff” (furniture, clothes, computer equipment, jewelry, family heirlooms etc.) are also owned by the trust. I work with them to make decisions as to the wisdom and propriety of transferring other property (bank accounts, automobiles, stocks, insurance policies etc.) into the trust. A living trust can also allow for the appointment of a custodian to manage gifts my client’s leave to minor children or make plans for their pets’ care – all after they die!

A big reason why this type of planning is effective is it helps avoid probate. A person’s probate estate is everything that is owned by that person in their own name alone on the day they die. If such assets or property consist of real estate or are worth more than $100,000.00 in Illinois or $50,000.00 in Indiana, the distribution of those assets requires going to court, and opening a probate estate. But, if a person’s assets are transferred into a trust, those assets are NOT owned by them, or in their name when they die. The trust survives them, and a successor trustee of the client’s choosing can, in most instances, administer the estate without having to go to court.

But sometimes, the ongoing management of a living trust can have difficulties. For example, a client who has a living trust may decide to sell the home that is now owned by the trust. When the real estate transaction is near the time to close, the title company overseeing the deal will need to verify if the trust is valid, still in effect, and that the trustee has the authority to convey real estate.

In the past, the only way to verify this information would be to disclose a copy of the trust to the title company. This is objectionable because the trust agreement usually contains a lot of confidential information about the clients and their families. Other than the questions of validity, identity of the trustee, and the authority to convey the real estate, the rest was none of the title company’s business.

Attorneys would try to get around the requirement of total disclosure by drafting affidavits for the grantor or trustee of the trust, citing and quoting the language from the sections of the trust that applied to the information sought by the title company. Sometimes attorneys would redact the private information from the trust before disclosing the rest.

These solutions did not always work. Sometimes, the institutions would be uncooperative and resistant. A bank or title company would simply insist that a certified copy of the entire trust was the only thing they would accept. Even where the institution was willing to accept a summary of the trust contents, they also often insisted on the use of their own form or policy, creating an undue burden for trustees who might need to interact with multiple institutions, each with their own distinct policy and format regarding trust disclosures. Of course, this would mean an attorney tasked with meeting all these requirements would have to charge a higher fee for all the extra work.

In 2015, however, the Illinois General Assembly offered a practical solution. Senate Bill 1877 (codified today at 760 ILCS 3/1013) provided a more sensible and efficient means for the trustee of an Illinois living trust to deal with third parties regarding trust property. This new law expressly authorizes a trustee to use a “Certification of Trust” to help manage trust affairs.

This legislation allows a trustee, with the specific authorization of the statute, to simply present a third party with a document in the form of a notarized affidavit containing specific information about the trust. The proscribed statutory format includes:

• A statement that the trust exists and has not been revoked, modified or amended in any way that would make the certification incorrect;

• The date the trust was executed;

• The identity of the settlor/grantor of the trust (i.e., the trust creator);

• The identity and address of the current trustee;

• The trustee’s powers;

• Whether the trust is revocable or irrevocable;

• Whether the trust may be amended, and if so, the identity of the person holding the power to amend it;

• The authority of co-trustees to sign;

• The trust’s taxpayer ID number (if the client wishes to disclose); and

• The manner in which trust property should be titled.

The statute’s required inclusions are basic and provide the kind of information financial institutions and title companies are looking for. No other additional information is necessary.

The reality is a bank, financial institution, or title company presented with an accurate and complete certification of trust like this generally does not have any valid reason for requesting the entire trust agreement. Any institution “making a demand for the trust instrument in addition to a certification of trust or excerpts is liable for damages if the court determines that the person did not act in good faith in demanding the trust instrument.” (760 ILCS 3/1013(h)).

This statutory certification of trust form is a welcome development for my clients who use revocable living trusts (and other trust mechanisms as well) as part of their estate plan. It makes trust management less confusing, easier, and provides predictable clarity when dealing with third party institutions. I will often include a certification of trust for my clients along with the other estate planning documents I prepare so they will have it handy when needed (although the certification may need updating if a lot of time has passed since it was originally signed, so the institution asking for the information can be assured such information is up to date).

Interested in creating an Estate Plan for your family? Contact John.