How to transfer property into a trust

When real property owners want to transfer surface real estate or minerals to their heirs through a trust, there are several common problems a title examiner will find, because the owners didn't know how to transfer property into a trust. Sometimes, the owners make the mistake of conveying property to the individual Trustee, instead of to the Trustee in his or her capacity as Trustee of the named trust. Other times, the property owner conveys the property directly to the trust and fails to file a memorandum of trust listing all the property to be transferred. Finally, property owners often try to combine a memorandum of trust and a conveyance into a single document. These problems can create problems with title to the real property, referred to as a cloud on title, and often result in costly and undue litigation and delays on royalty payments to mineral owners.

There may also be cases in which the owner also needs to know how to transfer property out of a trust. There may be specific differences if it is a revocable living trust or another kind of revocable trust, which is why professional counsel is recommended. 

Transfer of Property Directly to the Trustee of the Trust, as Trustee

The easiest and most common method for transferring real property into a trust is to convey the property by deed to the appointed Trustee. The conveyance of property by deed to the named Trustee of your trust, whether it be the surface estate, the mineral estate, or both, is the easiest way to transfer property, and it does not necessitate the filing of a memorandum of trust under the Oklahoma Trust Act. The Trustee only holds title to the property in their official capacity, as Trustee of the trust, not as an individual.

Transfer of Property Directly to the Trust

Another method for transferring real property into your trust is to convey the property by deed directly to your trust, without naming the Trustee as grantee. This type of conveyance necessitates the filing of a memorandum of trust under the Oklahoma Trust Act. Title 60 of the Oklahoma Statutes contains the Oklahoma Trust Act, which governs all things related to trusts, including requirements for filing of a Memorandum of Trust in certain instances relating to the conveyance of real property. The memorandum of trust must include the date of creation and the name of the Trustee or Trustees of the trust. The memorandum will contain a list of property that the property owner is intending to place in the trust and must be filed (along with the deed) with the county clerk in which the real property is located. A memorandum of trust alone cannot convey property to the trust.

Potential Consequences of an Improper Transfer

Sometimes, property owners attempt to create a single document that transfers real property into their trust, while also satisfying the requirements for a memorandum of trust. However, combining a conveyance and memorandum can result in confusion regarding granting language, which only becomes more problematic if the property owner is later unavailable to discuss intent. 

Consequences of a Transfer on Title Examination

A cloud on title can arise if the property owner improperly conveys the property to the trustee as an individual, does not file a memorandum of trust when the property is conveyed directly to the trust, or tries and fails to combine a memorandum of trust and conveyance. If an examiner does not have a memorandum to serve as evidence of the property owner’s intent to transfer property, the examiner will not be able to give effect to the transfer; likewise, if the examiner has a conveyance of the property to the individual trustee and not a conveyance to them as Trustee of the trust, the examiner will give this property to the Trustee in his or her individual capacity.

Conclusion

A cloud on title can arise if the property owner improperly conveys the property to the trustee as an individual, does not file a memorandum of trust when the property is conveyed directly to the trust, or tries and fails to combine a memorandum of trust and conveyance. If an examiner does not have a memorandum to serve as evidence of the property owner’s intent to transfer property, the examiner will not be able to give effect to the transfer; likewise, if the examiner has a conveyance of the property to the individual trustee and not a conveyance to them as Trustee of the trust, the examiner will give this property to the Trustee in his or her individual capacity. 

Do you have surface real estate or mineral interests that you need legal assistance to properly trasnfer those interests to heirs? Are you responsible for determining or correcting the current legal status of surface real estate or mineral interests? Call Ball Morse Lowe and our team of Oil + Gas Title Examination Attorneys today at 405-701-5355.

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