Selling a house in a trust after death

Dear Len & Rosie,

My husband of 27 years and I created a trust and conveyed our home to the trust. He recently passed away. I want to sell our house. How do I get it out of the trust? Can I do a quit claim deed? If I do now sell the house, do I still have to get clear title? Can I just wait until I find a buyer?

Eileen

Dear Eileen,

When married couples create revocable trusts, they almost always name themselves as the initial trustees. After all, why put someone else in control of your assets when you don’t have to? So in your case, the deed to your home should show that title is held in both of your names as trustees. If you were to try to sell the home today, there would be a small problem getting through escrow because your husband’s name is still on the deed.

Fortunately, this is easy to clear up. You need to do is to record an affidavit of death of trustee with your husband’s death certificate attached to notify everyone that you’re now the sole trustee of the trust as a result of your husband’s death. You also need to submit a Preliminary Change of Ownership Report to the County Assessor to show that the property isn’t subject to a Proposition 13 reassessment because of your husband’s death. Property transfers between spouses never trigger a property tax increase.

You don’t have to do this right now, but it’s best that you take care of business sooner rather than later. You should sit down with your attorney to review your trust and all of the assets you and your husband owned upon his death. At the very least, your home and investments ought to be appraised in order to determine the date-of-death values for tax purposes. If your husband’s assets were worth more than $5,000,000 then an estate tax return must be filed within nine months of his death, whether or not any tax is due. Also, his separate property and community property assets received a new cost basis as a result of his death. That’s why it’s important to obtain date-of-death values of all of your assets, not just your home.

Another reason to review the trust now is so that you can know how far you can go if you want to amend the trust. Your trust may be an A/B trust that requires your husband’s half of the trust assets to be transferred into an irrevocable bypass trust. Or maybe the trust allows you to do whatever you want. It’s important to know. You should also update your durable power of attorney and advance health care directive because you surely named your husband as primary agent on both of them.

Our point is that the legal work isn’t over and done with after a trust is signed. When an owner of a trust dies, the survivors should always review the trust with an attorney to make sure everything is on the right track.

Len & Rosie

Estate planning for blended families

Dear Len & Rosie,

Two very dear friends of ours have lived together, unmarried, for over twenty years. He owns the house. Both were married before and have grown children and grandchildren. Each of them are financially well-off, and they have bank accounts, investments and other assets.

When we mentioned that we had a trust, they said they did not have a trust, or even wills, and they want nothing to do with them. I would appreciate any information you could provide about community property and the possible consequences of their decision not to plan for the eventual disposition of their assets.

Alfred

Dear Alfred,

Your friends are shortsighted. The absence of an estate plan adds to a family’s trauma when they loose a loved one. They are not saving money by leaving things to chance.

We assume that your friends want their property to wind up in the hands of their respective children after both of them pass away. Having no estate plan at all is not the best way to make that happen. When one of your friends dies, any assets they own together in joint tenancy will go to the surviving partner. When the surviving partner dies, those assets will to his or her children by intestate succession, leaving other family with nothing.

On the other hand, the surviving partner will have no rights to the assets of the deceased partner, other than those held in joint tenancy. To own community property, a couple must either be married or registered as domestic partners with the California Secretary of State. There’s no common law marriage in California, no matter who long they have lived together. Any assets owned by the deceased partner, titled solely in his or her own name, belong to the dead partner’s probate estate and will pass to the his or her children unless there’s a will that says otherwise. In your friends’ case, if he dies first, she won’t have any right to the home and may be forced to move out. Where is she going to live?

Your friends can avoid these problems by creating wills or a trust that clearly spells out how they each want to dispose of their jointly acquired assets, as well as their separate assets. After one partner dies, a portion of the dead partner’s assets can be held in trust for the benefit of the survivor. For instance, he may want to preserve her right to live in her home of twenty years. He could do so simply by leaving her a life estate in the home in his will, or by creating a trust that holds the home for her benefit. When she dies, the home could then pass to his children, instead of going to her children.

Unless they truly do not care what happens to their property, each other, and their families, your friends really need to pull their heads out of the sand and create an estate plan to distribute their assets they way they want, instead of leaving it all to luck.

Len & Rosie