Actions Required for California Real Property Owned by a Deceased…

Successor Trustee's Duties

The successor trustee must take action. Delay is the enemy.

Most often one child is named as successor trustee of a deceased parent's trust. This child assumes fiduciary duties and responsibilities on the death of the parent. This Tip Sheet by Deed and Record explains the actions the successor trustee must take for real property in California. The first action is to determine how the real property is owned.

In a perfect world, a copy of the last transfer deed is with trust. If not, the last transfer deed can be obtained from the recorder’s office in the county where the real property is located. If the real property is in the name of the deceased parent only, the successor trustee cannot assume control of the real property. Instead, a petition in a California probate court for a court order to transfer the real property is required.

If on the date of death of the parent the parent’s trust owns the real property, the successor trustee must provide notice to his or her siblings with information in a format and by a deadline that complies with California Probate Code Section 16061.7. The notice must either include a copy of the trust or notice that the siblings are entitled to a copy of the trust. Good practice is to provide a copy of the trust for full transparency and expediency.

To take control of the real property of the successor trustee files with the county recorder, an “affidavit, death of trustee.” The affidavit is a declaration by the successor under penalty of perjury, the fact the owner has died and the successor trustee is authorized by the trust to act on behalf of the trust.

The successor trustee reviews the trust for instructions on what to do with the real property. Most often the trust directs distribution to the children of the deceased parent. This ambiguity allows the successor trustee the discretion to either transfer ownership outright or to sell the real property.

If the property is to be sold, prior to sale, the successor trustee will need a federal tax identification number also known as an EIN to open a bank account. The sale proceeds are deposited into this trust account. If needed, the successor trustee holds back enough funds to pay outstanding debts, funeral costs, costs to administer the trust and taxes. Checks are issued to the children.

If the children are to own the real property, change of ownership out of the trust to the children is by deed. The deed is signed by the successor trustee on behalf the trust. The deed is submitted to the County Recorder to update the data base of rightful owners maintained by the recorder.

Any transfer of real property in California is subject to a step-up in the property tax base to market value as of date of transfer. There are exclusions to the automatic step-up in the property tax base. One such exclusion is a transfer from parent to child.

To obtain the exclusion a “Parent to Child Property Tax Reassessment Exclusion for California Property Tax” must be filed with the assessor in the county where the real property is located. The exclusion is filed after the deed has been recorded. The reason is because the claim must reference the recorded deed and the date the deed was recorded.

Regardless if the property is sold or transferred to the children, an appraisal as of date of death is needed. Real property receives a step-up in basis to market value. The appraisal establishes the new basis to save or eliminate capital gains tax on any sale in the immediate or distant future.

Most trusts direct distribution to the children of the deceased parent. This allows the successor trustee the discretion to either transfer ownership outright or to sell the real property. The successor trustee assumes fiduciary duties on the death of the parent. This press release explains actions required to meet those fiduciary duties.

This Tip Sheet is provided by Mark W. Bidwell, an attorney licensed to practice in California. Office is located at 4952 Warner Avenue, Suite 235, Huntington Beach, California 92649. Phone number is 714-846-2888.

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