PGTS Standard
6. A written opinion has been obtained from legal counsel licensed to practice in the applicable jurisdiction regarding the appropriate method of holding title to trust assets. If legal counsel has indicated that the existence of the trust should be disclosed, such legal counsel has indicated the appropriate method of disclosure such as “Trustee for …” [PGTS]
Fiduciary Responsibility
Understanding what your fiduciary responsibility requires is very important when owning real estate or holding any deeded property in a fiduciary capacity. Not following your legal counsel’s direction for holding the title and/or presenting fiduciary disclosures could cause serious problems when seeking to administer the property after the donor dies. Standard #6 is intended to avoid these serious problems that could cost your organization financially and possibly become quite an embarrassment.
For example, suppose your organization is the trustee of a revocable trust, and real property was intended to be placed into the trust. Continue to suppose the Trustor disregarded the counsel of the attorney and the property was deeded to “Local Conference” when it should have been deeded to “Local Corporation of Seventh-day Adventists Trustee for the donor.” The problem would be the Local Conference is not a legal entity and cannot hold property. There is not a legal person who could administer this property. In addition, the error on the deed may not be discovered until the fiduciary organization seeks to administer the property, according to the trust documents, after the donor dies and finds they have no legal standing. Even if this problem can be remedied, extra work would not have been necessary if the deed had been prepared correctly in the first place.
File Review
A handy tool to help you catch these errors is the file review, which standard #37 requires at least every five years. The review aims to find these mistakes and correct them before they become problematic and time-consuming. But even when the file is looked at once every five years, if the documents are not reviewed properly, the problem will not be discovered early enough to make the necessary changes while the donor is still alive. It is essential to know the proper language for deeded properties and to follow the file review checklist to catch these errors. An example of a checklist can be found in Appendix C of the PGTS Manual.
It is also important to use correct language when documents are prepared that leave a bequest of real property. An excellent example of the importance of this is when a donor wants to distribute property to their local school and designates the real estate in their will to the Local Adventist Academy. Most schools are not a legal entity and cannot hold property, therefore the intended gift could fail to be realized. Instead, the property should have been designated to the Local Corporation of Seventh-day Adventists – for the use of the Local Adventist Academy.
If you are unsure how property should be titled or deeded in the area in which your organization works, I encourage you to contact your attorney and ask for a legal opinion on how to properly hold property and disclose any fiduciary obligation that your organization has to your donor. Then follow your attorney’s instructions and properly review your files to ensure the language on your deeds are correct.