California Real Property Ownership Change from Deceased Parent to Child Tip Sheet by Mark W. Bidwell
This is one of a series of tip sheets prepared by
Ownership change of real estate in
The value of real property is determined by an independent third party known as the probate referee. A probate referee is a real estate appraiser qualified to submit his or her appraisal to the probate court.
Property appraised at less than
Real property held in joint tenancy or a revocable trust is not included in the value of a probate estate. Succession is a good tool to pick up the lots of land, timeshares, vacation homes, and houses in rural areas that were omitted or overlooked in the decedent's estate planning.
Real property with market value greater than
Two documents are needed to transfer
Affidavit Death of Trustee is a declaration under oath, by the successor trustee. The successor trustee declares the owner has died and attaches a certified copy of the death certificate. The successor trustee further declares he or she is authorized to take control of the real estate property according to the terms of the trust.
The affidavit is filed with the county recorder. The successor trustee then has the authority to take control. Control is limited to what is directed by the trust. Typically, the trust directs the successor trustee to distribute the real estate property of the parent to his or her children.
The second step is to prepare a quit claim deed from the parent's trust to the children. A quit claim deed does not contain any implied warranties. The successor trustee who "quit claims" real estate simple conveys whatever ownership interest the parent had along with any debt or loans secured by the property. The successor trustee makes no promises and the property is taken "as is."
The successor trustee to a parent's trust has the additional duties to notify, file tax returns, and prepare an accounting. An accounting of assets and debts, income received and debts and expenses paid provides transparency and minimizes second guessing of the successor trustee's actions.
Successor trustees often need to open a bank account to make deposits and pay debts of the estate. Banks require a Federal Tax Identification Number. A tax return from the date of death to the close of the estate is needed for each year the trust has assets. The return is Form 1041 and is filed on the tax number used to open the bank account.
The successor trustee is required to notify heirs of the decedent and beneficiaries of the trust in a format and manner required by
Any real property distribution to a child of a deceased parent qualifies for Proposition 13 parent-to-child property tax exclusion. The parent's property tax base for assessment is transferred to the child. But to receive the reduction in property tax, a claim for reassessment exclusion must be filed with the county assessor.
Transfer-on-death real property receives a "step-up in basis" to reduce or eliminate capital gains tax. The step-up is the real property's fair market value as of the date of death. Children protect the new basis with an appraisal in the event of an
The last tax on land and real property transfers is the documentary tax. This tax currently is
This tip sheet provided by
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