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Determining The Legal Viability Of Oral Trusts

12/29/2022 | Trust

The basic premise of a trust is fairly straightforward: A person (the settlor) asks another (the trustee) to retain and manage an asset for the benefit of yet another (a beneficiary). Given the simplicity of that explanation, one might think that a trust is little more than a promise made between people in Woodland Hills. This may prompt the question of whether or not one can transfer assets through an oral trust.

The answer to that question depends on the type of property being considered. In terms of ownership, all property is defined as either “real” or “personal.” The main difference between the two is movability: personal property is movable, while real property is not. Examples of personal property might be a car, furniture, or cash. Land and anything attached to it (say, a house) are examples of real property.

Oral trusts dealing with the transfer of property are not valid due to a legal principle known as “the Statute of Frauds.” According to the National Paralegal College, the Statute of Frauds basically states that there are certain promises that must be documented in order to be enforceable. Among these is the transfer of ownership of land. Thus, one cannot to gift ownership of a parcel of land or any structure that sits on it via an oral agreement.

One can transfer personal property through an oral trust, yet the California Probate Code states that clear and convincing evidence must be present in order for such an agreement to be valid. The law goes on to state that the word of the settlor alone does not meet this evidentiary standard. Knowing this, one might determine than simply transcribing a trust agreement would be much simpler than trying to establish the evidence required to validate an oral trust.