The Kenwood Press
: 02/15/2007

Breaking a Trust

Len Tillem

Dear Len & Rosie,

My husband of 27 years and I created a trust and conveyed our home to the trust. He recently passed away. I want to sell our house. How do I get it out of the trust? Can I do a quit claim deed? If I do now sell the house, do I still have to get clear title? Can I just wait until I find a buyer?

Eilee

Dear Eilee,

The trust you and your husband created probably named both of you as the initial co-trustees. If so, then the deed the two you signed put the home in both of your names as the trustees of the trust. If you were to try to sell the home today, there would be a small problem getting through escrow because your husbandís name is still on the deed as an owner.

Fortunately, this is easy to clear up. All you need to do is to record a death certificate with an affidavit of death to notify everyone that youíre now the sole trustee of the trust as a result of your husbandís death.

Strictly speaking, you donít have to do this right now. But itís best that you take care of business sooner rather than later. You should sit down with an attorney to review your trust and all of the assets you and your husband owned upon his death. At the very least, your home and investments ought to be appraised in order to determine the date-of-death values for tax purposes. If your husbandís assets were worth more than $2,000,000, then an estate tax return must be filed within nine months of his death, whether or not any tax is due. Also, his separate property and community property assets received an increased cost basis as a result of his death.

Another reason to review the trust now is so that you can know how far you can go if you want to amend the trust. Your trust may be an A/B trust that requires your husbandís half of the trust assets to be transferred into an irrevocable bypass trust. Or maybe the trust is a simple trust that allows you to do whatever you want with both halves of the property.

Our point is that the legal work isnít over and done with after a trust is signed. When an owner of a trust dies, the survivors should always review the trust with an attorney to make sure everything is on the right track.

Len & Rosie




Dear Len & Rosie,

My mom doesnít have a will yet but weíre encouraging her to make one. She has a draft will that leaves her home to all three children, but I have some questions. First, the house is under my motherís name and my brotherís name. Is it true that he will get the house automatically on our motherís death? Also, my other brother is autistic and will have special needs. How does my mom work that language into her will?

Pilar

Dear Pilar,

We hope that your mother isnít trying to make her own will. Doing your own estate planning works for some people, but you should never try it if there is anything about your estate that is out of the ordinary. Your motherís proposed will wonít work the way she wants, and itís not what your disabled brother needs.

If your motherís home is in joint tenancy with your brother, then when your mother passes away, your brother will own 100% of the home outside of probate, regardless of what your motherís will says. Wills do not have any effect on assets not subject to probate administration, such as assets held in joint tenancy and accounts with pay-on-death beneficiaries. If your motherís home is to pass under the terms of her will, either your brother has to give it back to her or he has to pass away first.

As for your disabled brother, your mother can create problems for him if he inherits a share of her estate outright. If your brother collects Supplemental Security Income (SSI) or Medi-Cal benefits, then he can have only $2,000 in countable assets. An inheritance from his mother can cause him to lose medical benefits that he relies on today and will need in the future.

Your mother has three planning alternatives for your disabled brother. She can simply give him his share outright, and cause him to lose his benefits. She could also disinherit him and rely on you and your other brother to step up and provide for your autistic brotherís needs. Or she can create a special needs trust for his benefit.

A special needs trust isnít for do-it-yourselfers. These trusts are designed to follow specific loopholes in federal entitlement regulations to allow an inheritance to be held for a disabled person without causing a loss of public benefits. Your mother should meet with an estate planning attorney and create an estate plan that wonít make things more difficult for her children down the road.

Len & Rosie



Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, 12-12:45 p.m., and Sundays, 4-7 p.m. on KGO Radio 810 AM.