Here’s the scenario: Homeowner reads an article in the newspaper and decides to create a revocable living trust (“trust”). In the article he learned that a trust can transfer all of his assets to his heirs upon his death without requiring his heirs to pay expensive fees in a court probate proceeding. He contacts a reputable attorney, creates a trust and transfers his assets, including his home, to himself as trustee (manager) of the trust. He then has the assurance that if something happens to him, the person he has designated as his successor trustee will in effect “step into his shoes” to continue to manage his assets through the trust. Since the trust never dies, no probate would be required if he passes away.
Fast forward a couple of years. Homeowner reads an ad in the newspaper which claims that he can reduce his house payment substantially if he refinances his mortgage. He looks into it and, lo and behold, it is true! He refinances his mortgage. Unfortunately, unbeknownst to him, in the huge stack of papers he was given, he signed a deed transferring his home from himself as trustee of his trust back to himself in his individual capacity. As it turned out, the mortgage company he used was unfamiliar with California law relating to trusts and therefore required him to remove his property from the trust so that the loan could be made to him in his individual capacity. If Homeowner had known that his property had been taken out of his trust, he could have put it back in the trust once the loan was complete; however, he didn’t know.
Fast forward another few years. Homeowner passes away. His successor trustee attempts to sell his house but is told that the house is not in the trust and that the property must go through probate. The successor trustee contacts a savvy lawyer and learns that if the estate plan has the right documentation, the lawyer can petition the Court to have the property declared an asset of the trust even though it was not properly titled in the name of the trust when Homeowner passed away. The quoted cost for preparing and filing the petition was a fraction of the expense involved in a full-blown probate proceeding. The lawyer was hired and, after reviewing the trust and the documents prepared along with it, the lawyer found clear evidence that Homeowner intended his home to be part of his trust. Armed with this documentation, the lawyer filed the petition with the Court. Based on the evidence presented in the petition, the Judge declared the property was an asset of the trust and probate was not required. The successor trustee was then able to proceed with the sale as planned.
© 2023 by Marlene S. Cooper. All rights reserved.
(You may obtain further information at the website www.marlenecooperlaw.com, by e-mail at MarleneCooperLaw@gmail.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).