When a parent dies who has had the forethought to establish a trust, the probate process can be avoided, which can be time-consuming and costly.
Now, let’s assume that the parent/trustee has real property in California and has named a successor trustee whose job it is to ensure that the property is passed on to the parent’s heirs. How is this done?
The following documents must be submitted to the recorder’s office of the county the property is located in:
A notarized Affidavit of Death of Trustee
The successor trustee must affirm that the parent / trustee has died and that the successor trustee named in the parent’s trust is the new trustee. The affidavit must also state that the deceased parent / trustee owned the real property. An original certificate of death must be submitted in support of the affidavit.
- A New Deed
When the affidavit is filed and recorded with the county recorder, the successor trustee can sell the property or transfer ownership to the decedent’s children. If the property is going to be kept by the family, a new deed transferring ownership to the beneficiaries named in the trust is necessary. This is typically accomplished by executing a “Grant Deed.” The new deed must also be notarized.
- An Appraisal
When the above documents are filed, the successor trustee can transfer ownership from the trust to the decedent’s children or sell it. Any change in ownership results in the property tax assessor reevaluating the property tax base to reflect current fair market value.
In other words, a new appraisal of the property contained in the trust must be done at the time of death, as transfers of real property due to death receive a “step- up” in basis equal to the fair market value upon the date of death.
A Reassessment Exclusion Form
Fortunately, in California there is a tax exemption when the transfer of real property is from parent to child. In order to claim it, the above document must be submitted. The successor trustee can also reduce capital gains tax on the property if it is sold.
Transferring ownership of real property (a home, building, or land) out of a trust is part of the formal legal process of “administering a trust.” It is generally a straightforward process, but if done incorrectly, trustees can be held legally liable for their actions or in actions.
For questions about Trusts or Trust Administration, contact my SF East Bay Trust and Estate Law Firm at 925-322-1795 for a consultation.