Bulletin: CO000034

Date:
February 26, 2002
To:
All Issuing Offices in Colorado
RE:
Conveyances to Trusts in Colorado

Dear Associates:

In July 2001 the Colorado Legislature enacted Senate Bill 40 ("Bill"), relating to trust ownership and the transfer of trust property. This Bulletin addresses the effects of these statutory changes when insuring title to real property.

The following is a summary of the major changes to the statutes, each item of which is more specifically addressed later in this Bulletin:

  • Requires recordation of a "Statement of Authority" rather than a Trust Affidavit in order for a trust to sell, encumber or otherwise deal with real property

  • The recording of a "Statement of Authority" in most cases will eliminate the need for the review of a trust agreement

  • If the conveyance deed names the grantee as the trustee of the trust, it is no longer necessary to a name the beneficiary of the trust in order for the conveyance to be treated as a conveyance into the trust

C.R.S. 38-30-166 no longer relates to trusts and therefore eliminates the requirement for a recorded trust affidavit in order for a trust to own, transfer or encumber property. (See Colorado Bulletin No 000020 which sets forth the required information for a Trust Affidavit). Instead a new section , C.R.S. 38-30-108.5 was added which provides that a trust may acquire, convey, encumber, lease or otherwise deal with any interest in real or personal property in the name of the trust. This statute states that in order to evidence the existence of a trust and the authority of one or more trustees to act on behalf of the trust, any trustee of the trust may record in the county where the property is located a "Statement of Authority".

According to C.R.S. 38-30-172 a Statement of Authority must contain:

  • The name of the entity;

  • The type of entity and the state, country, or other governmental authority under whose laws it was formed;

  • A mailing address for the entity; and

  • The name or positions of the person authorized to execute instruments conveying, encumbering, or other wise affecting title to real property on behalf of the entity;

  • And a Statement of Authority may contain statements regarding any limitation that may exist upon the authority of the person named in the statement or any other matter concerning the manner in which the entity deals with real property

A standard form of Statement of Authority that is acceptable for use in Colorado is available through the references section at the end of this bulletin.

The statutory language of C.R.S. 38-30-172 provides that the recording of a Statement of Authority is prima facie evidence of the facts recited in the Statement of Authority insofar as the facts affect title to real property and prima facie evidence of the authority of the person executing the Statement of Authority to execute and record the Statement of Authority on behalf of the entity. Based on the foregoing, it is generally no longer necessary to obtain and review the trust agreement. However should you have any information or concerns regarding possible self dealing by the trustee or any other unusual circumstances, you must require a review of the trust agreement and you must also check with your underwriting contact.

COMPANY POLICY:
When insuring transactions where a Trust is selling, encumbering, or otherwise dealing with real property you must require recordation of a Statement of Authority to evidence the existence of the trust and the authority of one or more trustees to act on behalf of the trust. This is necessary even if a trust affidavit has been previously recorded.

The new section, C.R.S. 38-30-108.5, replaces the provisions of C.R.S. 38-30-166 which provide that a trust can acquire, convey, encumber, lease and otherwise deal with real property. Therefore, statutory authority continues to be that a trust is an entity capable of holding title and a conveyance of property can be made directly into the name of the trust.

Example of conveyance into a trust:

Grantee: The ABC Trust dated January 1, 1998
or
Grantee: The ABC Trust

However, the Bill modified C.R.S. 38-30-108 which relates to the conveyances into the name of the trustee of the trust. The modifications allow a trustee who holds title to real property on behalf of a trust to give notice of that trustee's representative capacity either before or after the instrument conveying the interest in real property has been recorded. The Bill Repealed the prohibition of such notice after an instrument conveying an interest in real property has been recorded. (This was intended to overcome the problems which had arisen under C.R.S. 38-30-108 and the recent Lagae v. Lackner case.) In addition, this section was modified to remove the requirement that the grantee in the conveyance instrument include the name of the beneficiary of the trust.

COMPANY POLICY:
If the conveyance names the grantee as the trustee of the trust then it must also properly identify the trust. If this requirement is satisfied, so long as a Statement of Authority is recorded, you may treat the grantee in said conveyance as a trust.

Example of proper conveyance into trust:

Grantee: Mary Smith, Trustee for the ABC Trust dated January 1, 1998
or
Grantee: Mary Smith , Trustee for the ABC Trust

(Please note, the beneficiary of the trust need not be named under the new statute provisions).

If the conveyance names the grantee as the trustee but does not identify the trust then you must treat the owners as individuals not as a trust.

Examples of conveyance into the person individually:

Grantee: Mary Smith, Trustee

In this situation, a curative affidavit may be recorded that refers by proper description to the recording information of the instrument of conveyance and that contains a description of the representative capacity of such grantee (see C.R.S. 38-30-108 (3)). Upon recording of such an affidavit all persons will have notice of the representative capacity of the grantee and you may treat the grantee in said conveyance as a trust. In this situation it will be necessary to search the name of the trustee for liens, judgments or other adverse matters of record If any of these record matters are discovered you must check with your underwriting contact.

This memorandum is intended to provide general information on new statues affecting title insurance in Colorado. As additional issues or questions arise regarding specific procedures to be followed in each case, please don't hesitate to contact your Stewart Title Guaranty Company underwriting personnel.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
CO000020 This Bulletin has been replaced by CO000034.
Related Bulletins:
None
Underwriting Manual:
19.44 Trust And Trustees
Exceptions Manual:
None
Forms:
CO Statement of Authority 1