Estate Planning Practice Blog

Taking Over as Successor Trustee? Affidavit of Death of Trustee...

If you are named as successor trustee and it is time for you to take over the Living Trust because someone has died, you will want to prepare and record an Affidavit of Death of Trustee.

It's a simple affidavit where you state that the original trustee has died, attach a certified copy of their death certificate and record it in the county where they owned real property.

This will make it easier to handle all real property transactions involving the Living Trust.

To get additional information about this process, please contact an attorney in the area where the loved one has passed away or who prepared the Living Trust.

Transferring Savings Bonds to Your Trust.

If you own United States savings bonds (also called bearer bonds), please be sure they are registered either with a Transfer on Death designation listed on the bond itself or transfer ownership of the bond to your Living Trust.

Here's how:

You will need to complete and submit a Request to Reissue United States Savings Bonds to a Personal Trust. You can download this form, called PDF 1851, directly from the Bureau of Public Debt website.

The form is easy to fill out, but you must itemize each bond you want reissued.

Let's say your trust is called the "John and Jane Smith Revocable Trust dated January 1, 2006." You will want to title your bearer bonds using this language. The date the trust was created is a part of the name of the trust.

Consult with your attorney or financial advisor for more information.

Will I Owe Gift Tax if I Deed My Kid My House Now?

This question comes up quite often.

Can I deed my house to my daughter or son while I am still alive? Will I have to pay any taxes?

Yes to the first, but maybe to the second question. It is very dependent on your facts.

Taxes that come into play will be gift taxes. The donor or the person who is giving the gift may owe gift taxes.

You are entitled to a total non-exempt lifetime gift exemption of a $1 million before you pass away. You can give away up to a $1million in assets without owing any gift tax. However, you still have to file a gift tax return with the IRS when you deed the house to your children or anyone else as a gift.

Your lifetime gift giving will be subtracted from your federal estate tax exemption, which is $2 million in 2006.

So, if your house is worth close to a million in today's dollars, you may want to consult an attorney or accountant for an analysis and more details on how this type of transaction may affect your tax liability and estate tax exemption.

Also, personally, gifting your house now to your kids is never as good as inheriting the house when you pass away. They lose the stepped up basis on the home's value and you lose your home. 

Cross References:

See my post on January 22 for an explanation of stepped up basis.

Reverse Mortgages and Living Trusts. Be Sure to Put Your Home Back into the Trust Afterwards.

If you are obtaining or already have  a reverse mortgage for your home, please be sure that your home is back into your Living Trust after closing on the mortgage. If your home is out of your Living Trust at any time, it will create a hassle if you pass away during this time.

Lenders always take a property that is held by a trust out of the trust to handle any mortgage or other loan transactions.

It is easy to transfer title of your home back into your Living Trust. You can execute either a grant deed or a quitclaim deed from yourself back into your yourself as trustee of your Living Trust. For example, such a deed would have language like this: Jane Smith, as a single woman TO Jane Smith, trustee of the Jane Smith Revocable Trust dated January 1, 2006.

You can go back to whoever handled the reverse mortgage paperwork and ask them to complete this for you after the reverse mortgage has closed. Or you can contact your attorney who prepared your Living Trust. I always tell my clients to come back to me. I already have your deed information in a Word file. It is only a matter of changing a few words on the computer to generate a new deed. I do not normally charge my clients for this transaction other than asking them to pay the recording fees if I am handling the recording.

See also my post on February 17 talking about taking homes out of your Living Trust.

California Rules on Property Tax & Change of Ownership.

This is a legalese post regarding change of ownership for real estate in California. If there is a change of ownership, there will be a reassessment of property taxes. Property taxes are a big deal in California especially with the high cost of real estate.

If you are considering changing ownership of real estate in California from Joint Tenancy to another form of vesting, please read the State of California Board of Equalization's Explanation of Changes to Property Tax Rules 462.040 and 462.240.

If you look at pages 6 through 10, it provides examples of what constitutes a change of ownership and what does not.

This Explanation has been very useful in my practice when dealing with real property and estate planning.

By the way, here's a handy link to a directory of all California county assessor webpages.

Deed Transfers in California.

More on transferring your home or other real property into your Living Trust.  Goody.

It is rather easy once you have the procedure in place.

First, you will need to draft a grant deed changing the vesting of the real estate from the current vesting to the name of your trust. It will go like this:

John and Jane Smith, husband and wife as community property hereby grant to John and Jane Smith, trustees of the Smith Family Revocable Trust dated January 1, 2006.

On your grant deed, you will want to include the statement that there is no documentary transfer tax due with this sentence: This conveyance transfers an interest into a Living Trust, R & T. Then you will want to sign your name next to this as a declarant of the tax transfer agent stating that there is no documentary transfer tax owed. Sounds confusing, I know.

Next you will include a legal description of your property.

The easiest way to accomplish all of this is to find the grant deed from when you purchased the property in the first place. It will have all of the pertinent information.

After your grant deed is properly prepared, signed and notarized.... you will want to mail it to the county in which the property is located for recording.

You will need to complete a Preliminary Change of Ownership Form (PCOR) along with your grant deed.

Mail the deed, the PCOR, a letter requesting recording, and a blank check with the words not to exceed $50.00 above the signature line -- and send it off.  Recording fees actually do vary depending on which clerk that opens your envelope. That's the best explanation I can come up with.

Los Angeles County takes about 8 to 10 weeks to complete recording. Orange County is about 2 weeks, but often quicker. Riverside County is about 3 to 4 weeks. Smaller counties like Shasta County is about 2 weeks.

For more information about where to mail it -- check with the county clerk-recorder's website.  Here's a list of clerk-recorder offices in all counties in California and their websites: BINGO.

Of course, seek the advice of an estate planning attorney on preparing deeds for your Living Trust if you are unsure of the procedure.

Here's a caveat -- a good estate planning attorney will take care of these deed transfers for you! I do all deed recordings for my clients -- for every property in California. And I do them for my clients if they refinance their homes or purchase additional property.

Deed Transfers to Your Living Trust.

If you have a Living Trust and own real estate outside of California, you will want to have that out of state property transferred into your Living Trust. Your attorney can work with attorneys in other states to assist with the deed transfers.

If you decide to take care of these kinds of transfers on your own, The Law Offices of Long H. Duong has prepared a small compliation of out of state attorneys that can assist you. Check it out here.