REAL ESTATE TRANSACTIONS AND TRUSTS
By: Mina N. Sirkin, Esq. and Evan R. Sirkin, Esq.

Frequently, clients who have formed trusts will ask: "How will forming a trust help the surviving spouse and beneficiaries save on capital gains taxes in sale of a home?"

Capital gains are generally determined by deducting the "BASIS (tax cost)" or the depreciated deductions, from the sales price. If the property is inherited, the new basis is generally the value of the property at the decedent's death. You should however investigate the basis with your accountant.

If a property is held in community property, or as community property in a trust, the basis of the decedent spouse's half is valued on the date of his or her death. The surviving spouse's basis is then also changed to the date of death value. Therefore, there will be a double step-up in basis.

If the property is held in joint tenancy, only one half of the property basis will be stepped-up. Therefore, one half of the step up in basis will be lost. The best manner of holding title in each situation is different, and you should consult an attorney to help you determine that.

Selling a property once in trust is just as easily accomplished as selling a property that is not in trust. As in a normal sale, it is recommended that you use a competent real estate agent. Once an offer is received, you should then notify the escrow company that title is held in the name of the trust, and the escrow company will insure that the grant deed is properly signed.

If you are a successor trustee of a trust, the best way to sell a home would be to sell it "as is." Although there are limited disclosure requirements with trusts and estates, you are required to inform the buyer of what defects you know to exist that you have learned as a successor trustee. An "as is" sale is not a guarantee for any future liability. An "as is sale" does however put the buyer on notice that he or she should conduct a more aggressive investigation of the property prior to purchase. As in any other sale, the successor trustee of the trust should offer a home protection policy in favor of the buyer. This can cost anywhere between $215.00 and $500.00, but is a good gesture on the part of a seller who wants to quickly sell the property.

More important, if you are a successor trustee of a trust, you want to insure that an affidavit of death of the previous trustee has been filed before you enter escrow. This will require that you have a certified death certificate of the previous trustee, and will help expedite the escrow procedure.

As with all sales, or legal agreements, as a successor trustee of any trust, you should have your purchase agreements reviewed by an attorney, even if you are currently represented by a real estate agent. Real Estate agents will not give you legal advice regarding the implications of your actions.

Mina N. Sirkin and Evan R. Sirkin are partners at the Law Offices of Sirkin and Sirkin. Sirkin and Sirkin has seven office locations available throughout Los Angeles and Orange counties. Their practice is limited to estate planning (Wills, Trusts and Probate). To reach them by telephone, please call 818. 340. 4479.

The information you obtain at this site is not, nor is it intended to be, legal advice.
You should consult an attorney for individual advice regarding your own situation.

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