Real Estate Trust Transfer From Parent to Child Tip Sheet by Mark W. Bidwell

Tip sheet on how children can take ownership and reduce taxes of California real estate owned by a deceased parent’s trust. This tip sheet is provided by Mark W. Bidwell, a licensed attorney in California.

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Mark W. Bidwell, Attorney at Law

How to transfer real estate out of a deceased parent's trust and reduce capital gains and property tax.

Irvine, California (PRWEB) January 29, 2014

A child who inherits real estate from a parent’s trust is often the Successor Trustee. The successor trustee must transfer ownership of the real property, including homes and commercial real estate, out of the trust. The new owner of the real estate must also take steps to minimize capital gains tax and property tax. Website, Deed and Record, promoted by Mark W. Bidwell specializes in California real estate parent-to-child transfers.

Two documents are needed to transfer real estate out of a trust; a deed and an “affidavit of death of trustee.” The “affidavit of death of trustee” puts the County on notice that the previous owner has died and includes the name of the Successor Trustee who has the authority to transfer, sell, distribute or convey the real property. The affidavit must be recorded with the County.

The other document the Successor Trustee prepares is a deed transferring ownership out of the trust and over to the children of the deceased parent. Deeds are either “warranty deed” “grant deed” or “quit claim deed.” Grant deeds and warranty deeds by law have the owner’s promise that he or she has not conveyed the property to someone else and the property does not have any undisclosed taxes, loans, assessments or liens secured by the real property.

A quit claim deed conveys ownership “as is.” Quit claim deeds do not contain any implied warranties of debt outstanding or good title. Either type of deed is appropriate for the transfer of real estate out of a trust.

The deed must be part of the public database maintained by each county in California. The deed is “recorded” in the county where the real property is located. Recording puts the world on notice how title is held and is the final word on ownership. Counties in California require that a deed be accompanied by a document entitled “Preliminary Change of Ownership Report” (PCOR). The PCOR provides more detailed information on the transfer and is signed by the grantee.
There is no transfer tax on trust transfer deeds. California Revenue and Taxation Code exempts trust transfer deeds from transfer tax. To obtain this exemption the tax code must be stated on the deed.

Upon receipt and control of the real property the children should also take steps to reduce taxes in the future. A transfer or inheritance due to death receives a ‘step-up’ in basis. The parent’s purchase price of the real property or basis disappears. The new basis is the market value of the real estate on the date of death of the parent. A sale in the future incurs capital tax on the difference between the market value on the date of the parent’s death and the sales price.

Good practice is to obtain an appraisal on the property as of date of death. An appraisal is needed in the event of an IRS audit.

Any change in ownership of real property increases the base for property tax. The increase is either the sales price or the market value at date of ownership change. Real property distributions to a child of a deceased parent qualify for Proposition 13 parent-to-child property tax exclusion.

The amount excluded is $1 million plus the principal residence of the parent. A “Claim for Reassessment Exclusion for Transfer Between Parent and Child” form must be filed within three years after the date of the transfer to obtain this exclusion. Good practices suggest not putting this off and instead, submitting it once the quit claim deed has been recorded.

Author’s profile, Mark W. Bidwell is licensed to practice law in California. Office is located at 18831 Von Karman Avenue, Suite 270, Irvine, California 92612. Phone number is 949-474-0961. Mr. Bidwell markets through websites such as http://www.DeedandRecord.com.

Deed and Record is an online service to prepare affidavits, deeds and “Claim for Reassessment Exclusion for Transfer Between Parent and Child”. Prepared documents are recorded or filed with the appropriate government agency.


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