A trust is an alternate option for holding title to real property. Trusts involve three parties: the settlor (sometimes called the grantor), who contributes property to the trust; the trustee, who holds title to the trust property and administers the trust; and the beneficiary, who has a present or future interest in the trust.
A living (inter vivos) trust is an estate planning tool governed by NMSA 1978, Chapter 46A (Uniform Trust Code). The settlor executes a trust instrument, an unrecorded document designating the trustee (oftentimes themselves, a successor trustee who will take over the trustee’s duties upon the settlor’s death or incapacity), and one or more beneficiaries, as well as outlining the trust’s assets and provisions for its administration.
In order to transfer property to a trust, the settlor executes a deed to title the property in the name of the trustee as the trust’s representative. Upon death, the trustee transfers assets to the beneficiaries as stated in the trust instrument, thereby avoiding probate.
New Mexico’s Uniform Trust Code outlines the powers of the trustee. Generally, these include “all powers over the trust property that an unmarried competent owner has over individually owned property” unless otherwise limited by the terms of the trust (NMSA 1978, § 46A-8-815). This includes the specific power to “acquire or sell property, for cash or on credit, at public or private sale” (§ 46A-8-816(B)).
To remove property from a trust, the trustee executes a deed, conveying title to a new owner (the grantee). Deeds transferring property from a living trust can sometimes be named after the executing grantor (e.g. “trustee’s deed”), though they are functionally equivalent to statutory deeds, which are named for the type of warranty they carry.
New Mexico recognizes three basic deed types: warranty deed, special warranty deed, and quitclaim deed. The type of deed used will depend on the situation, as each deed carries its own level of warranty of title.
The grantor of a warranty deed covenants that he is lawfully seized of the property in fee simple; that the title is free from encumbrances (unless otherwise stated); that the grantor has good right to convey title; and that he will warrant and defend the title “against the lawful claims and demands of all persons” (§ 47-1-37).
In a special warranty deed, the grantor covenants that the title is free from encumbrances and that the grantor will warrant and defend the title “against the lawful claims and demands of all persons claiming by, through or under the grantor, but against none other” (§ 47-1-38).
Finally, a quitclaim deed is simply a deed in fee simple transferring “any interest the grantor owns in the premises, without warranty” (§ 47-1-30).
A deed conveying property with the highest level of warranty opens the grantor to a substantial degree of liability, even if he has no knowledge of the quality of title prior to his appointment. A quitclaim deed may purport to convey interest even if the grantor has no interest to convey.
Any conveyance from a trustee should meet all form and content requirements for conveyances affecting title to real property. Apart from vesting title in the name of the grantee, the granting clause should include specific information about the granting party, such as the name of the executing trustee and the trust, and the execution date of the trust instrument. The trustee must sign the instrument in the presence of a notary public before it is recorded in the county in which the subject real property is situated.
When conducting business involving a trust, second parties may require a certification of trust under § 46A-10-1013, which document confirms the trust’s existence and the trustee’s authority to enter into transactions for the trust.
View Available New Mexico Real Estate Deed Forms
Consult a lawyer with questions relating to transfers from living trusts in New Mexico.