Post Death Trust Transfers of California Real Property from Parent to Child tip Sheet

IRVINE, Calif. - Oct. 21, 2013 - PRLog -- One child of a deceased parent is most often the Successor Trustee to the Trust. Mark W. Bidwell, a California attorney provides an internet service at www.deedandrecord.com  for child to transfer real property out of the trust and to the children.

Two documents are needed to transfer real property in California, quit claim deed and affidavit death of trustee.  The affidavit of death of trustee puts the County on notice the owner has died and the name of the Successor Trustee who has authority to transfer, sell, distribute or convey the real property. The document is recorded with the County.

The other document the Successor Trustee signs is a quit claim deed transferring ownership out of the trust to the children as directed in the trust document. A quit claim deed conveys ownership “as is” with no warranties of title.

Upon receipt and control of the real property the children should take steps to reduce taxes in the future. Good practice is to obtain an appraisal on the property as of date of death. The basis to the new owner is the fair market value of the real property.  This is a known as a step-up in basis.  Capital gains tax is on the difference between sale price and the date of death market value. An appraisal is needed for any IRS audit.

Any real property distribution to a child of a deceased parent qualifies for Proposition 13 parent-to-child property tax exclusion. The parent’s property tax base for assessment is transferred to the child. But to receive the reduction in property tax the claim for reassessment exclusion must be filed. Filing is due within 3 years of transfer. Good practices suggest not putting this off and submitting the claim once the quit claim deed has been recorded.

The Successor Trustee has additional duties other than the transfer of real property. Successor Trustees to a decedent’s trust have the duty to notify, file tax returns, prepare an accounting and distribute assets of the trust.

Successor Trustees often need to open a bank account to make deposits and pay debts of the estate. Banks will require a Federal Tax Identification Number. A tax return from the date of death to the close of the estate is needed for each year the trust has assets. The return is Form 1041 and is filed on the tax number used to open the bank account.

The Successor Trustee is required to notify heirs of the decedent and beneficiaries of the trust in a format and manner proscribed by California law.  Requirements of the notice are in California Probate Code Section 16061.7. The Successor Trustee is required to notify the death to each County where the decedent owned real property. Notice is sent to the assessor’s office of the County.  The notice is titled “Change in Ownership Statement Death o Real Property Owner.”

Accounting for assets is not a legal requirement unless a demand is made by a beneficiary of the trust. But good practice is to provide an accounting. An accounting of assets and debts, income received and debts paid provides transparency and minimizes second guessing of the Successor Trustee’s actions.

Article provided by Mark W. Bidwell, a California attorney. Office is at 18831 Von Karman Avenue, Suite 270, Irvine, CA 92612. Phone is 949-474-0961 and email is Mark@DeedAndRecord.com