A nominee trust is in my chain of title - What should I do about it? - by Elizabeth Young

A trust is one of the entities used to hold real property in the Commonwealth of Massachusetts. There are many types of trusts: Living trusts, irrevocable trusts, donative trusts, and non-testamentary trusts are a few. Each type of trust has its own legal implications. In 2012, Massachusetts adopted M.G.L. C. 203E, the Massachusetts Uniform Trust Code, the “MUTC”. The MUTC generally replaces, and greatly expands upon, the trust law provisions (Article VII) of the Massachusetts Uniform Probate Code. The MUTC applies to all types of true trusts, but does not apply in general to nominee trusts, as a nominee trust is not a true trust. 

A nominee trust is an entity that often holds title to real property. A nominee trust is not a true trust because the trustees lack the power to deal with the trust property without the direction of the beneficiaries. The names of the beneficiaries are often known only by the trustee, and the names of the beneficiaries are rarely of record. The trustee of a nominee trust may also be a beneficiary of a nominee trust, although the trustee may not be the only beneficiary of a nominee trust. A third party may rely on a conveyance by a trustee of a nominee trust without inquiring into the terms of the trust. The beneficiaries of a nominee trust may have the power to terminate the trust at any time and obtain title to the trust property, and often does have that power in a nominee trust.

A title examination for a property held by a nominee trust must include a grantor and grantee search for all of the named trustees and the name of the nominee trust. A tax lien or a bankruptcy found for the trustee of a nominee trust must be investigated. If the trustee is also a beneficiary of the trust, the tax lien or bankruptcy may affect any transaction involving the real estate held by the trust, and must be resolved.

If the nominee trust is on record, the nominee trust must be reviewed thoroughly. The terms of the nominee trust determine the name of the nominee trust, the names of the trustees and successor trustees if appointed in the nominee trust, the term of the nominee trust, any provisions for the distribution of the Trust property, provisions for the appointment of successor trustees if the named successor trustees are not available, are unable to serve, or refuse to serve, a conclusive evidence clause that provides for the ability to rely on the trustee’s act without a trustee certificate and a “powers” clause, detailing all of the powers that the trustee of a nominee trust might perform, plus any additional powers. 

With the help of the Real Estate Bar Association of Massachusetts (REBA), the Massachusetts legislature enacted M.G.L. C. 184 §35 to allow the recording of a M.G.L. C. 184 §35 trustee certificate to establish the existence of a trust at the Registry of Deeds or in the Land Court District for locus. Form 35, the recommended form for a M.G.L. C. 184 §35 trustee certificate is available on REBA’s website. 

A M.G.L. C. 184 §35 must be executed under the penalties of perjury by the trustee of the trust and certify to a) the identity of the trustee(s), b) the authority of the trustees to act with respect to real estate owned by the trust; or c) the existence or nonexistence of a fact which constitutes a condition precedent to acts by the trustees or which are in any other manner germane to affairs of the trust. 

The sole purpose of a M.G.L. C. 184 §35 trustee certificate is to establish the existence of the trust on record to hold title to the real estate. In Registered land, a M.G.L. C. 184 §35 trustee certificate must be filed every time that the trustee of the trust mortgages or conveys any portion of the property which is held by the nominee trust. In recorded land, only one M.G.L. C. 184 §35 trustee certificate should be recorded. 

The second trustee certificate that is often used in conveyancing does not establish the existence of the trust. A standard trustee certificate establishes the a) the identity of the trustee(s), b) the trust is in full force and effect, and c) the identified trustees have the power to convey the property and have been directed to do so by the beneficiaries for the consideration stated or for nominal consideration. This is the form that may be required by the terms of the nominee trust to be recorded with a conveyance by the trustee of the nominee trust. A standard trustee certificate should be recorded with any deed from a nominee trust for nominal consideration. 

Whenever title to real property is held by a nominee trust, whether created of record by the recording of a trust, or created of record with the recording of a M.G.L. C. 184 §35 Trustee Certificate, the conveyancing attorney must confirm that the current trustees are appointed, the prior trustees have resigned or are no longer able to serve, the trust is in full force and effect, and the documents that establish these facts are on record at the registry of deeds. 

The REBA website has all of the forms required to record to establish these facts on record: Form 20C: nominee trust resignation; Form 20D: nominee trust appointment of successor trustee; Form 20E: certificate of acceptance by trustee; Form 20F: nominee trustee certificate of appointment of successor trustee and acceptance; Form 20G: trustee certificate; and Form 35 M.G.L. C. 184 §35.

Elizabeth Young is vice president and senior underwriting counsel at Westcor Land Title Insurance Company, Norton, Mass.