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Frequently Asked Questions


Understanding Trusts and Probates

Trusts

When the owner of real property dies, the title to the property eventually passes to someone else through a number of different means. Most common is the death of a spouse, where under a Joint Tenancy Deed, or Property Deed, the ownership now rests totally with the surviving spouse. If the spouse now decides to sell the property there are some relatively simple documents, Termination of Joint Tenancy or a Termination of Community Property that the spouse’s attorney can complete and record. The surviving spouse can now sell and transfer the property.

The title to the property is held in a revocable trust, usually the family’s name, i.e. The Robert Smith family trust dated 1-1-09.

The trust would have a provision that established a successor trustee to take over and administer the trust upon the death of the trustee. The trust would specify what was to be done with the property; both personal and real property, held within the trust and what powers are granted to the trustee to carry out the provisions of the trust. If specific items are to go to certain beneficiaries of the trust or the real property is to be sold and the proceeds distributed, the successor trustee will handle it. If there is real property that is to be sold, the trustee can generally list it with a real estate broker and handle it as a normal real estate transaction. However, the beneficiaries of the trust may need to give their approval of the sale. The handling of the trust by a successor trustee has possible legal and tax ramifications and should be carried-out under the direction of an attorney.

What is a trust?

A trust is a device for holding property in which ownership is divided between a trustee and a beneficiary. The trustee holds legal title to the property and has both the right and the duty to manage the property for the benefit of the beneficiary. 

What is a beneficiary?

The beneficiary has an equitable interest in the property, which means that, although the beneficiary has no right to manage the property, he has the right to the economic benefit of the property.

How to create a trust?

A trust is created when a property owner transfers property to a person with the intent that the recipient holds the property for the benefit of someone else. There are usually three parties to a trust.

1) Owner who transfers the property. 

2) Person receiving the property. 

3) Person for whose benefit the property is being held.

While a trust involves three parties, it does not require three people, as one person can perform more than one duty. In a typical revocable trust, established to avoid probate, a person establishing the trust may also be the initial trustee and the principle beneficiary of the trust. A limitation to this is that one person cannot be both the sole trustee and the sole beneficiary of the trust. In considering the establishment of a trust, we strongly recommend you consult an attorney to discuss the entire planning process. 

Probate

When a person dies with a Will it is called 'Testate'. The Will establishes an executor to carry out the wishes of the decedent as set forth in the Will. The Will should establish who the heirs of the estate will be and what inheritance they will receive. If there is real property in the estate, the Will may require the executor to sell the property and distribute the proceeds appropriately. 

If the real property is to be sold, it may be required that any offer the executor accepts be sent out to court for review and confirmation. The attorney for the estate will advise as to the procedure for the sale and oversee the entire process. It is referred to as “Probating the Estate.” The attorney represents the estate and the executor in court. If court confirmation is required there will be a hearing in Superior Court to confirm the sale. At the hearing, there may be other potential buyers and they will have a chance to over-bid the original buyer’s offer. There will be a minimum over-bid amount that must be reached in order to successfully over-bid and purchase the property. Sometimes there are numerous over-bidders and the judge takes the role of auctioneer. When the top bid is reached, the judge will approve the sale and an order confirming the sale will be signed by the judge. This order will authorize the title company to close the sale to the winning buyer with the signature of the executor. Again, this entire process is controlled and directed by the attorney for the estate. 

If the Will granted the executor authority to sell the real property without court confirmation, it will be sold under the “Independent Administration of Estates Act.” Upon advice and review by the attorney for the estate, the executor may list the real property with a real estate broker. When a satisfactory offer is obtained, the executor may accept the offer subject to the approval of the named heirs in the estate. The attorney will notice the heirs of the terms of the sale. If there are no objections the executor will close the sale thru the title company. The proceeds from the same will usually be deposited and held until a distribution of the estate is made.

 In the event an objection is made by one of the heirs, the sale will usually be submitted to the court for confirmation. 

What is Probate Property? 

Probate property is all property directly owned for which there is no legally recognized death beneficiary designation. 

How is Probate Property transferred?

 There are two ways in which probate property can pass upon death: by the laws of intestacy or by the means of a validly executed will.

Intestacy 

Intestacy is the statutorily created system for disposing of probate property at death that is not disposed of by will. Each state has its own intestacy statues. The decedent’s domicile at the time of death determines which state intestacy law is applicable, even if the person lived most of their life in a different state.

Wills

Not wanting to rely on intestacy provisions, a person may write a Will directing the disposition of the property. In order for a Will to be given effect, certain requirements must be met. 

If you are selling a trust or probate property Berkshire Hathaway HomeServices Drysdale Properties can help. We have over 30 offices and many years of experience in selling probate and trust properties in Northern California. We incorporate proven, professional, state of-the-art marketing materials, Virtual Property Tours, links to all internet real estates websites, Licensed REALTORS, and so much more to make the process a smooth and profitable one for you and your family. 

 Please Note! 

The information contained in the “Understanding Probates and Trust Section,” is for informational purposes only and is to act a primer in understanding topics as such. In no way is the information presented here to be used as legal advice. It is strongly recommended that you contact an attorney to discuss your probate and trust matters. If you would like to use one of our preferred attorneys, please fill out the form below.

 



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