What is the role of a law firm as trustee in an indemnity deed of trust?

Full question:

Regarding indemnity deed of trust and security agreement: second generation is loaning money to make improvements on land. The land is owned by estate/trust of deceased parents, principal beneficiary being third generation. The family business is the borrower with estate/trust as grantor, securing loan with real property. As the lender, I hired a lawyer to write the loan agreement, lender agreement, indemnity deed of trust, and security agreement. The law firm has listed its self as trustee for the estate/trust on the indemnity deed of trust. Please explain! Is this common? What is their role, rights, extent of involvement after filing mortgage with the state?

• Category: Real Property
• Subcategory: Deeds
• Date: 04/07/2025
• State: Maryland

Answer:

An indemnity deed of trust (IDOT) is a recordable document used in Maryland to avoid recordation and transfer taxes in real estate transactions. These taxes apply when a deed of trust is recorded, typically based on the debt amount secured. An IDOT is granted by someone other than the borrower, usually a guarantor, securing their collateral interest and secondary liability rather than the primary liability of the borrower.

In this case, the estate/trust is the grantor, and the family business is borrowing money to improve the land. The estate guarantees the loan repayment through the IDOT. This structure avoids current taxation on the debt.

It is common for a law firm to act as the trustee unless the lender prefers another party. The trustee holds a technical title to the property. Their main responsibilities include reconveying title when the loan is paid off or initiating foreclosure if there’s a default. Typically, trustees can foreclose non-judicially under a power of sale in the IDOT, which reduces costs for all parties involved.