Placing Real Estate into Trust
When I have a client or clients who own real estate, in addition to listing the real estate on the Schedule of the Trust, it’s imperative to re-title the property from the owners name(s) into the name of the Family Trust, and to have the deed recorded. This can be done by Grant Deed or Trust Transfer Deed.
What happens when real estate has been listed on the Schedule of the Trust, but the deed retitling the real estate into the Trust is not recorded, but lost and the Trustor(s) have passed away?
Since title to the real estate is in the name of the deceased person or persons, how do the Successor Trustee(s) under the Trust sell the real estate when the title company cannot pass clear title to a potential buyer or even to the beneficiaries? The only person or persons who can legally pass title are dead!
Luckily, here in California, the Successor Trustee(s) can file a petition with the Probate Court in the County where the deceased resided, asking that the real estate be confirmed as an asset of the Trust. Since the asset/real estate was listed on the Schedule of the Trust, the Courts are likely to rule that the Trustor(s) had the requisite intent to have the real estate placed into the Trust at the time of formation. When the Petition is granted and the order from the Court confirming the asset into the Trust is signed, title & escrow can then insure and pass clear title, thereby effectuating the transfer of the real estate.
A bigger problem arises when, let’s say, a married couple or an individual, Trustor(s), set up an estate plan. Later, the Trustor(s) purchase another piece of real estate. The property was never subsequently listed on the Schedule of the Trust nor was the property retitled in the name of the Trust by way of deed. What happens when the Trustor(s) pass away? You guessed it, Probate.
The provisions of the will, in this case, a “Pour-Over-Will”, allow the representative(s) to, pending a hearing in probate court, place the property into the Trust so the property can be distributed through the Trust, instead by way of Intestate Succession.
Both of these scenarios occur all of the time!!!
By not titling real estate into the name of your Trust, with the Trustor(s) as Trustee(s) and/or not listing the real estate on the Schedule of the Trust defeats the whole purpose of setting up an estate plan, and that is to avoid probate and unnecessary time and costs.
My next Case Study will address the way to pass real estate from a Trust when the Trust has been set up properly!!!
If any of these problems sound familiar, give me a call!!!