Successor Trustee’s Duty to Keep Beneficiaries of a Trust Informed

After the death of the settlor the successor trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration. This duty is met with notice and account. The first notice is mandatory under California law and is referred to as “notification by trustee.”

   Notification by trustee must be made within 60 days from date of Settlor’s death. The notice provides the successor trustee’s contact information and informs the beneficiary of his or her right to a copy of the trust. Most importantly, this notice puts a time limit on a beneficiary’s right to contest the trust. The beneficiary has 120 days plus 10 days if mailed, to contest the trust and on the 131^st day this right is forfeited. Failure of the successor trustee to serve this notice could result in personal liability.

   “Notice of a proposed action” is not mandatory but does protect the successor trustee from personal liability. This notice provides a description of the action to be taken and an explanation of the reasons for the action. A beneficiary has 45 days from the delivery of the notice of proposed action to object. If no beneficiary objects, the successor trustee is not liable to any beneficiary with respect to the proposed action.

   To keep the beneficiaries informed an account is required at least annually and at the termination of the trust. An account is assets and liabilities as of date of death, plus receipts, less disbursements and distribution to equal assets and liabilities at the end of the account period. Beneficiaries of the trust have three years to bring a claim against the trustee based on information provided in the account.

   In California, a successor trustee has the duty to keep beneficiaries of the trust reasonably informed of the trust and its administration. This duty is met with notification by trustee, notice of proposed action and an account. An account must be made at least annually and at the termination of the trust.

California Real Estate Property Post Death Trust Transfers

Two documents are needed to transfer California real property from a trust to beneficiaries of the trust; a deed and an ‘affidavit of death of trustee.’  An ‘affidavit death of trustee’ is a declaration, under oath, by the successor trustee. The successor trustee declares the owner has died and attaches a certified copy of the death certificate. The successor trustee further declares he or she is authorized to take control of the real estate property.

The affidavit is filed with the county recorder where the real property is located.  It is now of public record the successor trustee has the authority to take control of the real property. Control is limited to what is directed in the trust. Typically, the trust directs the successor trustee to distribute the real estate property to individuals identified in the trust.

Distribution is be either sale of the real property or transfer of ownership. If the successor trustee sells the property, the affidavit death of trustee is all that is required. Escrow and title will use the affidavit as the successor trustee’s authority to sell the property.

Ownership transfer of real property is by deed out of the trust to the beneficiaries of the trust. The deed must conform to format requirements of California law and contain a legal description. An example of wording is “John Doe, Successor Trustee to the Smith Revocable Trust grants to Jane Smith and Joe Smith real property located in the State of California, county of ….”

A “Preliminary Change of Ownership Report” is required with each affidavit and deed. This “report” provides additional information and is submitted with the deed. This “report” is not recorded.

Two additional documents may be needed with the affidavit and deed. If an exemption exists to the $75 tax imposed by Senate Bill 2 – Building Homes and Jobs Act, a cover sheet citing the reason is placed in front of the deed. Some counties in California have an additional county specific document that is an affidavit stating the reason no transfer tax is due. 

Two documents are needed to transfer California real property from a trust to beneficiaries of the trust; a deed and an ‘affidavit of death of trustee.’  An ‘affidavit death of trustee’ is a declaration, under oath, by the successor trustee. If the successor trustee sells the property, the affidavit death of trustee is all that is required. Ownership transfer of real property is by deed out of the trust to the beneficiaries of the trust.

How to Transfer California Real Property from Trust to Child

Two documents are needed to transfer California real property for a parent’s trust to the parent's children; an affidavit of death of trustee and a deed.  A third document is needed for Proposition 13 parent-to-child property tax exclusion.

Affidavit Death of Trustee 

This document is a declaration, under oath, by the successor trustee. The successor trustee declares the owner has died and attaches a certified copy of the death certificate. The successor trustee further declares he or she is authorized to take control of the real estate property according to the terms of the trust.

The affidavit is filed with the county recorder.  It is now of public record the successor trustee has the authority to take control. Control is limited to what is directed by the trust. Typically, the trust directs the successor trustee to distribute the real estate property to specified persons.

Deed 

The second step is to prepare a deed from the trust to the beneficiaries of the trust or to enter into a listing agreement for the sale of the real property. If sold, the proceeds from the sale of the real property are distributed to the persons identified in the trust and quit claim deed is not needed.

Claim for Reassessment Exclusion for Transfer between Parent and Child 

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. Californians voted to limit Prop 13 exclusion to $1 million and the child has to reside at the house. 

Reduce or Eliminate Capital Gains Tax

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 parent's death. The basis to the children 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.

"Change in Ownership Statement, Death of Real Property Owner" 

For decedents in both estates and trusts the "Change in Ownership Statement, Death of Real Property Owner" is to be filed within 150 days after the date of death. Change in ownership occurs in a revocable trust on the date the trust becomes irrevocable (date of death).

 Package service provided for Trust owning one real property.

• Attorney review of the trust

• Notice to beneficiaries of trust and heirs as required by California Probate Code Section 16061.7

• Prepare and file with County Assessor "Change in Ownership Statement, Death of Real Property Owner"

• Prepare Form SS-4 and file with the IRS for Federal Tax Identification Number

• Prepare and record Affidavit Death of Trustee with County recorder for one house or real property

Additional services

Prepare and file "Claim for Reassessment Exclusion for Transfer Between Parent and Child" with the Office of the Assessor 

Trust transfer (quit claim) deeds out of trust into names of beneficiaries and Preliminary Change of Ownership Report 

Accounting and tax preparation services

Additional legal representation 

Call 949-474-0961 or email Mark@DeedAndRecord.com for quote

Checklist of information and documents needed

• Address of each person named in the trust
• Address of real property owned by the trust
• Address of Successor Trustee
• Name and address of surviving spouse, if any, and each surviving child and each deceased child
• Original death certificate

To consult with an attorney call Mark W. Bidwell at 714-846-2888. For more information please go to www.BidwellLaw.com.

Trust Administration on Death of First Spouse: Funding of Bypass Trust and Survivor’s Trust

Often a trust directs on the death of the first spouse the trust is to be divided into two separate trusts, a bypass trust and a survivor’s trust. The purpose of the two trusts is to preserve the deceased spouse’s exemption from the estate tax. The estate tax is often referred to as the death tax.

Deed and Record prepares the affidavit death of first spouse and the quit claim transfer deed; prepares and files required transfer tax exemptions and records the affidavit and deed with the proper government authority.

The affidavit of death is a declaration, under oath, by the surviving spouse. The surviving spouse declares the other spouse has died and attaches a certified copy of the death certificate. The surviving spouse further declares he or she is authorized to take control of the real estate property according to the terms of the trust.

The affidavit is filed with the county recorder.  It is now of public record the surviving spouse has full and sole authority to take control of the real estate property.

The second step is to prepare and record a quit claim deed to fund the Bypass Trust and Survivor’s Trust. This step requires a division of all assets owned by husband and wife. A review of the trust document, notification to heirs of the creation of the Bypass trust and division of assets is required. The services of an attorney are required at this stage.