Utah Real Estate Code 57-1-21

Utah Real Estate Code 57-1-21

Utah Real Estate Code 57-1-21: Trustees of Trust Deeds — Qualifications

The trustee of a trust deed shall be:
(1)(a) any individual who is an active member of the Utah State Bar, or any entity in good standing that is organized to provide licensed professional legal services and employs an active member of the Utah State Bar, if the individual or entity is able to do business in the state and maintains an office in the state where the trustor or other interested parties may meet with the trustee to: request information about what is required to reinstate or payoff the obligation secured by the trust deed;
(A) deliver written communications to the lender as required by both the trust deed and by law;
(B) deliver funds to reinstate or pay off the loan secured by the trust deed; or

(C) deliver funds by a bidder at a foreclosure sale to pay for the purchase of the property secured by the trust deed;
(D) any depository institution as defined in (ii) Section 7-1-103 , or insurance company authorized to do business and actually doing business in Utah under the laws of Utah or the United States; any corporation authorized to conduct a trust business and actually conducting a trust business in Utah under the laws of Utah or the United States;
(iii) any title insurance company or agency that:
(iv) holds a certificate of authority or license under Title 31A, Insurance Code, to conduct insurance business in the state;
(A) Is actually doing business in the state;  and
(B) maintains a bona fide office in the state;
(C) any agency of the United States government;  or
(v) any association or corporation that is licensed, chartered, or regulated by the Farm Credit Administration or its successor.
(vi) For purposes of this Subsection (1), a person maintains a bona fide office within the state if that person maintains a physical office in the state: (b) that is open to the public; (i) that is staffed during regular business hours on regular business days; and (ii) at which a trustor of a trust deed may in person: (iii) request information regarding a trust deed; or
(A) deliver funds, including reinstatement or
(B) re payoff funds.
This Subsection (1) is not applicable to a trustee of a trust deed existing prior to May 14, 1963, nor to any agreement that is supplemental to that trust deed. (c) The amendments in Laws of Utah 2002, Chapter 209, to this Subsection (1) apply only to a trustee that is appointed on or after May 6, 2002. (d) For an entity that acts as a trustee under Subsection (1)(a)(i), only a member attorney of the entity who is currently licensed to practice law in the state may sign documents on behalf of the entity in the entity’s capacity as trustee. (e) The trustee of a trust deed may not be the beneficiary of the trust deed, unless the beneficiary is qualified to be a trustee under Subsection (1)(a)(ii), (iii), (v), or (vi).
(2) The power of sale conferred by (3) Section 57-1-23 may only be exercised by the trustee of a trust deed if the trustee is qualified under Subsection (1)(a)(i) or (iv).

Naming a Trustee in Your Deed of Trust

A trust deed with an unqualified trustee or without a trustee shall be effective to create a lien on the trust property, but the power of sale and other trustee powers under the trust deed may be exercised only if the beneficiary has appointed a qualified successor trustee under (4) Section 57-1-22 . If you use a deed of trust, either to purchase real estate or to borrow money using your property as collateral, a proper trustee must be part of the transaction. Most states that commonly use deeds of trust instead of mortgages have laws regarding the qualifications of the trustee.

Using a Deed of Trust

A deed of trust is a legal document used in a real estate transaction either when the purchaser is borrowing funds for the purchase or when an owner of real estate borrows money and uses the property as collateral for the loan. While most states usually use a mortgage instead, a deed of trust is commonly used in some states, so check local laws to find out what is applicable in your situation. Your bank, savings and loan, credit union, or a local title insurer or real estate broker may also be able to give you this information or even help you find a trustee. A deed of trust involves three parties: the borrower, the lender, and the trustee. In a deed of trust, the borrower is called the trustor and the lender is the beneficiary. The trustee holds title to the property until the trustor has fully repaid the loan to the beneficiary, at which time the lender notifies the trustee, who then transfers full title of the property to the trustor. Although deeds of trust are sometimes called mortgages, the two documents are actually quite different. With a mortgage, there are only two parties: the borrower, known as the mortgagor, and the lender, or mortgagee. The borrower holds title to the property and the lender has a lien on the property until the loan is fully repaid, at which time the lender executes and records a release of the mortgage. Deeds of trust are usually preferred by lenders since they may offer simpler foreclosure procedures in the event of default by the borrower.

Commercial Lenders and Private Transactions

If you borrow from a commercial lender, it is most likely that the lender will determine the trustee, which is typically a title company, professional escrow company, or other company in the business of serving as a real estate trustee. Sometimes a real estate broker or an attorney serves in this role some states have laws governing who may or may not serve as a trustee in a deed of trust. Generally, the trustee must be an attorney, title insurance company, trust company, bank, savings and loan, credit union, or other company specifically authorized by law to serve as a trustee. Other states have no limitations. If you borrow from the seller of the property or another private party, you and the lender need to agree upon a third-party trustee. As with a commercial lender, you may be able to use a title company, escrow agent, real estate broker, or attorney for this purpose. Whether your trustee is a person or company, you need to make sure they can be relied upon to act impartially and to fulfill the necessary duties and responsibilities. Assistance with property transfers may also be obtained from an online service provider.

How to become a Licensed Insolvency Trustee

The Superintendent of Bankruptcy has the authority, under the Bankruptcy and Insolvency Act (BIA), to grant licenses to Licensed Insolvency Trustees. Before granting a license, however, the Superintendent must be satisfied that candidates meet certain qualifications. They must, for example:
• be of good character and reputation
• be solvent
• successfully complete the Chartered Insolvency and Restructuring Professional (CIRP) Qualification Program (CQP), the CIRP National Insolvency Exam and the Insolvency Counsellor’s Qualification Course; and
• pass an Oral Board of Examination

Main Duties of a Trustee

A trustee is an entity or person formally appointed to manage the assets of a trust for the benefit of its beneficiaries in accordance with the terms of the trust. A trustee owes fiduciary duties to the beneficiaries. These duties are typically set out in the trust deed or provided by Statute.
Duty to the terms
A trustee must know and adhere to the terms of the trust which are prescribed by the trust deed.

Duty of loyalty

Trustees have a fiduciary duty towards beneficiaries. A trustee must administer the trust solely in the interest of the trust beneficiaries and cannot place his or her interest in conflict with beneficiaries. Trustees should not profit personally from their role as trustees other than a fee which they may receive for their trusteeship.

Duty to manage the trust efficiently

To manage a trust efficiently, a trustee must be very familiar with the terms of the trust, the trust’s assets and liabilities, the circumstances of the beneficiaries and the purpose of the trust. Effective management systems should be in place to ensure that the appropriate decisions are made in a timely manner and taking into account the terms of the trust and the interests of the beneficiaries. This also includes effective communication with related parties and proper record keeping. A trustee also has a duty to invest prudently on behalf of the trust and should diversify the investment of trust assets in the interest of beneficiaries.

Duty to act personally

Trustees act personally and must be involved in decision-making in respect of a trust. While trustees are typically permitted to engage advisers such as lawyers and financial advisers, the final decision on trust matters should be made by the trustee. In certain circumstances, trustees may delegate powers to third parties by power of attorney or deed of delegation. This must be permitted by the trust deed. For example, delegating powers to an agent to purchase or sell property overseas. The trustee is still obliged to properly instruct and supervise the agent. Where there is more than one trustee, decisions must be made unanimously unless otherwise permitted by the trust deed.

Duty to consider the beneficiaries

A trustee must act impartially with respect to the beneficiaries by considering all beneficiaries in their decision making. They should also not follow the instructions of the settlor but may give consideration to the wishes of the settlor which is not binding unless included in the terms of the trust.

Duty to account

Unless otherwise provided by a trust, a trustee must keep trust accounts and other records. They must also respect beneficiaries’ rights with regard to requests for trust information. Generally, beneficiaries have a right to receive information about the trust but not the decisions of the trustee.

What Powers Are Granted to a Trustee?

The powers the grantor gives you, the trustee, in a trust instrument include the buying and selling of assets, determining distributions to the beneficiaries, and even the hiring and firing of advisors. Distributions to beneficiaries will include income distributions and principal distributions. Your powers as trustee enable you to determine what the beneficiaries receive from the trust and when, and give you the administrative powers ensure the smooth running of the trust.

Powers of a trustee: Buying and selling assets

You, as trustee, typically have the power under the trust instrument to buy and sell assets (except for any unusual asset the grantor wants retained in the trust). Aside from any other specific directions in the trust instrument or state law, you must follow the prudent man rule that is, to act as a prudent person would in managing their own affairs. In addition, most states have a legal list of investments that are suitable for trusts.
Powers of a trustee: Determining distributions to beneficiaries

The grantor can determine the frequency and amount of the distributions to the beneficiaries in the terms of the trust, or he or she can leave it to your discretion as trustee. If the grantor leaves it to your discretion, your job includes observing any guidelines in the trust instrument and adhering to the overall intent of the grantor. Some of the types of distributions you may need to make as a trustee include income distributions and principal distributions. Trusts contain different standards for when principal distributions can be made to a beneficiary based on whether the trust has an independent trustee. The following are two reasons for different standards for principal distributions:

• With no independent trustee: If there isn’t an independent trustee (and the trust is for the benefit of someone other than the grantor), the IRS has identified certain “magic words” that restrict the distribution of principal and keep the trust from being included in the beneficiary’s estate for estate tax purposes. The magic words that keep this trust out of the beneficiary’s estate are “health, education, maintenance, and support,” which constitute an ascertainable standard. This structuring may seem extremely technical, but it’s an important point, especially for the beneficiary and his or her heirs.

• With an independent trustee: Comfort isn’t one of the IRS’s magic words. Using the word “comfort” makes a trust taxable in a surviving spouse’s estate. Because many grantors feel the ascertainable standard described previously is too limiting, especially in a trust for the surviving spouse, grantors frequently elect to have an independent trustee. This enables the grantor to bestow broader powers of principal distribution without causing adverse tax consequences.

Hiring and firing advisors

The grantor and the person drafting the trust instrument understand that not every trustee will be a wizard at all aspects of trust administration. Trust instruments typically give the trustee the power to hire and fire advisors. Your grantor wants you to have any advice you need to run the trust and fulfill your fiduciary duty. If an advisor isn’t working out, including one whom the grantor has chosen, you need the power to let the advisor go whether for personal incompatibility with the trustee or a question of competence. If you feel you’ve given an advisor a fair chance to prove himself to you (and fair is defined by you as trustee, unless your trust instrument provides otherwise), then by all means, fire him and hire another one of your choice.

What Happens When a Will and a Revocable Trust Conflict?

A will and a trust are separate legal documents that typically share a common goal of facilitating a unified estate plan. While these two items ideally work in tandem, due to the fact that they are separate documents, they sometimes run in conflict with one another either accidentally or intentionally. By definition, a revocable trust is a living trust established during the life of the grantor, and may be changed at any time, while the grantor is still living. Since revocable trusts become operative before the will takes effect at death, the trust takes precedence over the will, when there are discrepancies between the two.

Terms Used In Utah Code 57-1-21

• Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.
• Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
• Deed: The legal instrument used to transfer title in real property from one person to another.
• Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default.
• Lien: A claim against real or personal property in satisfaction of a debt.
• Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
• Property: includes both real and personal property.
• State: when applied to the different parts of the United States, includes a state, district, or territory of the United States.
• Trustee: A person or institution holding and administering property in trust.
• Trustor: The person who makes or creates a trust. Also known as the grantor or settlor.

Real Estate Attorney

When you need real estate help, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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