Real Property Transfers out of Living Trusts in North Carolina

In the State of North Carolina, living trusts are governed by the North Carolina Uniform Trust Code, at Chapter 36C of the General Statutes. (Business trusts are governed by Chapter 39, Article 8 of the General Statutes.)

A trust is an alternate method of holding title to real property. In a trust arrangement, a settlor transfers property to another person (the trustee) during his lifetime (NCGS § 36C-4-401(1)). In a living trust, which takes effect during the settlor’s lifetime, the settlor generally also acts as the trustee. The trustee holds title for the benefit of another person or class of people, called the beneficiary. A valid trust must have a definite beneficiary, as specified in § 36C-4-402(a)(3).

The trust is administered by the trustee according to the provisions of the trust instrument. The trust instrument is an unrecorded document, which means the settlor’s estate plans remain private (unlike a will). Under § 36C-8-815(a)(2)(a), the trustee has all the general powers “over the trust property that an unmarried competent owner has over individually owned property,” unless limited by the terms of the trust, along with specific powers outlined in § 36C-8-816.

When real property is transferred into trust with a deed executed by the settlor, it is titled in the name of the trustee on behalf of the trust. Sometimes title is transferred erroneously to the trust as grantee instead of to the trustee; § 39-6.7 specifically addresses titling of transfers to and from trusts.

To convey an interest in real property held in trust in the State of North Carolina, the trustee uses either a general warranty deed, a special warranty deed, or a quitclaim deed, depending on the situation. Depending on the situation, other parties with interest in the property may need to join the deed in order to waive their rights. Consult a lawyer with questions about the appropriate level of warranty for the transaction.

A general warranty deed carries the broadest warranty that the granting party will defend the title against the claims of all persons, while a special warranty deed guarantees that the granting party will defend the title only against claims arising under, by, or through the grantor. North Carolina also recognizes a non-warranty deed – also known as a quitclaim deed – which, as the name suggests, conveys only the grantor’s interest, if any, with no warranties of title.

Conveyances may also be named after the granting party (such as “trustee’s deed”), but such deeds are functionally equivalent to deeds named after the type of warranty they convey. (Note: In North Carolina, another type of trustee’s deed, or a substitute trustee’s deed, is used to convey real property sold upon foreclosure under a deed of trust.)

In addition to meeting all requirements for form and content for any conveyance of real property in the State of North Carolina, a deed executed by the trustee should name all acting trustees as grantors, as well as the trust on behalf of which they are acting. A certification of trust under § 36C-10-1013 may be presented by or requested of the trustee in order to verify his authority under the trust and confirm his power to enter the transaction.

View Available North Carolina Trustee Deed Forms

Trust law can be confusing, and small mistakes may cause large problems down the road. Each case is unique, so contact an attorney for complex situations or with specific questions.