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Tip Sheet on How to Transfer California Real Property out of a…

How to transfer real property located in California from a parents’ trust to the parents’ children.

Tip Sheet by Deed and Record explains how to transfer real property located in California from a parents’ trust to the parents’ children. In a standard trust, the trustee directs the successor trustee to distribute the deceased parents’ assets to the parents’ children. Two documents are needed to distribute California real estate, an affidavit of death of trustee and a deed.

An affidavit death of trustee is a declaration in writing made under oath, by the successor trustee. The successor trustee declares the owners of the real property have died. The successor trustee also declares he or she is authorized to take control of the real estate property according to the terms of the parents’ trust. Attached to the affidavit are certified copies of the death certificates of the parents.

The affidavit is filed with the county recorder. 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 by the trust. Typically, a trust created by parents directs the successor trustee to distribute the deceased parents’ real property to the parents’ children.

The second document needed is a quit claim deed to transfer ownership of the real property out of the trust to the parents’ children. Or if the real property is to be sold before distribution a warranty deed is needed to transfer ownership from the trust to the buyer of the real property. In either case the deed is signed by the successor trustee.

Real property transfers to a child of a deceased parent qualify for Proposition 13’s parent-to-child property tax exclusion. The exclusion allows for transfer of the parents’ property tax base to children of the parents. But to receive the transfer in property tax base a claim for “Parent to Child Property Tax Reassessment Exclusion for California Property Tax” must be filed with the county assessor.

Upon receipt and control of the real property the children should take steps to reduce capital gains tax in the event the real property is sold in the future. Good practice is to obtain an appraisal on the property as of date of the last parent to die. The basis of the real property to the children is the fair market value of the real property as of the date of second parent to die. 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.

Two documents are needed to distribute California real estate out of a trust of deceased parents’ trust the deceased parents’ children, an affidavit of death of trustees and a deed. The “affidavit of death of trustees” establishes who can sign on behalf of the trust. The deed transfers ownership of the real property out of the trust.

A claim for “Parent to Child Property Tax Reassessment Exclusion for California Property Tax” is filed with the county assessor to reduce property taxes. An appraisal as of the date of death of the second parent is recommended to reduce capital gains taxes.

This Tip Sheet was prepared by Mark W. Bidwell, a licensed California attorney. His office is located at 4952 Warner Avenue, Suite 235, Huntington Beach, California. Phone is 714-846-2888.

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