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

Beneficiary vs Successor Trustee

Dear Len & Rosie,

My family has a living trust with two properties that amount to around $1.5 million and also a few hundred thousand dollars in cash in various bank accounts. My Grandmother and Grandfather were the owners of the properties and money until they passed away a couple years ago at the ages of 94 and 96. My father is 75 and is the last living child (both his brothers have passed), and according to my grandparents’ trust has since acquired everything, although no paperwork has changed and everything still appears in my grandparents’ names.

My father is having a lot of heart trouble and is in the hospital as I write after suffering his 4th seizure this morning, he is ok for now. The living trust has the beneficiaries in order of my father, my oldest brother, my middle brother and then me. Both of my brothers have moved out of the state so my father and I would like to amend the trust to list me as the primary beneficiary. I am the one who will have to deal with everything anyway when my father passes.

Toby

Dear Toby,

It seems fairly clear from the context of your letter that your father never got around to seeing an attorney about his parents’ trust after they passed away. And you may also be a bit confused about the way trusts work.

We cannot be sure without actually reviewing your grandparents’ trust, but if the trust left everything to your father upon their deaths, then the properties and cash should be distributed outright to your father, unless his inheritance is supposed to be held within a dynasty trust for your father’s lifetime benefit. If your father were to pass away, his interest in his parents’ trust will likely belong to his probate estate and shall then pass under the terms of your father’s will, if he has one.

What you and your father ought to do is to review his parents’ trust with an attorney to verify what ought to be done. He should also look into his own estate plan and should probably create his own revocable trust.

You also need to understand that there is a distinction to be made between who inherits a trust when someone dies (the beneficiaries) and who shall have the responsibility of administering the trust, paying the bills and taxes, and distributing what’s left to the beneficiaries (the successor trustees). It certainly makes sense for your father’s estate plan to name you as his successor trustee, if you’re the only child who lives nearby. But your father shouldn’t name you as his sole beneficiary unless he wants to disinherit his two other sons. There’s nothing preventing your brothers from inheriting California properties if they live out of state, or even out of the country. Unless that’s what your father wants. He needs to see a lawyer soon.

Len & Rosie