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By Diana Wade
reprinted from Estate Planning - CALDA 

Transferring property out of a trust

Ask the LDA


October 23, 2021

Diana Wade.

Often there are questions about how to transfer real property out of a trust. Your parents have died and they created a living trust years ago to avoid probate. How do you transfer the property out of the trust to the beneficiaries of the trust?

The successor trustee is named in the trust to distribute the property. Keep in mind that this is meant as a general overview and should not be a substitution for legal advice regarding your specific situation. The following is what typically happens:

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 (death of trustee) 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.

When the affidavit is filed and recorded with the county recorder, the successor trustee can sell the property or transfer ownership according to the parents' wishes. If the property is going to be kept by the family, a new deed transferring ownership to the beneficiaries named in the trust is next. This is where you need to be especially careful in California, however. Prop 19, effective as of February 16, 2021 significantly decreased the amount of property that can be inherited without incurring a reassessment for property tax purposes. Beneficiaries also get a tax incentive of the "step up in basis" if they choose to sell the property rather than holding on to it. See your tax advisor for more information on this issue. Remember this article is not legal advice because I am not an attorney and can only prepare documents that you specifically tell me to prepare.

If the beneficiaries decide to keep the property, the transfer can be done using a Grant Deed. The new deed must also be notarized and recorded with the county.

Fortunately, in California there is a property tax exemption when the transfer of real property is from parent to child. Unfortunately for beneficiaries, that property tax exemption has recently gotten a lot smaller. It only applies to a parent's primary residence that will be used as the child's primary residence. To take advantage of the property tax exclusion, a Claim for Reassessment Exclusion Form must be submitted to the County Assessor.

Remember this is just information. Please consult an attorney or a tax advisor if you have any questions.

Diana Wade is a Legal Document Assistant. She can be reached at (661) 821-0494 or Diana is not an attorney; she can only provide self-help services at your specific direction. Kern County LDA #185, ex 4/11/23.


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