Acting as a Trustee for an Estate in California

Acting as a Trustee for an estate in California

Most people don’t wake up and decide to research the sale of inheritances (specifically homes), but it’s vital. It’s common for savvy homeowners to place their house in something called a trust. If the homeowner passes, the inheritors can avoid the probate process and even save on taxes. 

A home in a trust can be sold, but the type of trust matters. Let’s start by talking about the different types of trusts and how each one works.

After that, we’ll talk about how trustees and beneficiaries can sell an inherited home in California. This is a subject our team knows well. We’ve even written a book about selling inherited homes and we’ll happily send a hardcopy to you for free - just let us know where to deliver it.

California Home

A California home - via David Sawyer 

But First - What is a Trust?

During the homeowners lifetime, they can place their home into something called a trust. Why would someone do this? 

Trusts provide a way for a homeowner and the creator of the trust (the grantor) to manage assets. With a trust, the grantor can smoothly pass or divide property to their inheritors. This side-steps a lengthy probate process, since the assets can remain under management, even if the original owner has passed on. 

A trust is a legal agreement that might manage property, vehicles, valuables, and other assets. However, the trust is a legal entity, not a specific person - so who controls it?

The Role of a Trustee

Rather than leaving it until the last minute, thoughtful homeowners often make plans for inherited property. When a trust is created for this purpose, it's usually managed by a trustee.

This trustee has the duty of managing the assets in the trust, which must be done in the best interest of the beneficiaries. The grantor, who created the trust, can also set guidelines for the trustee to follow.  

The trustee has the power to sell the home, or sell the entire contents in an estate sale (as per the trust or will’s guidelines). Our Guaranteed Sale Program can provide peace of mind for trustees selling inherited properties. Read more about how we guarantee that your property sells - and the profit it collects.

Estate Sale Event

An estate sale going on - via jongorey

A trustee in California has several duties, including:

  • Duty of Loyalty: Act in the best interest of those who benefit from the trust.
  • Duty of Impartiality: There must be no favoritism of any beneficiary over another.
  • Duty to Avoid Conflicts of Interest: Nothing should interfere with the trust’s management, including conflicts of interest that the trustee may have.
  • Duty of Disclosure of Information: The status of the trust should be known to the beneficiaries.
  • Duty Not to Delegate: The role of trustee is appointed and can not be handed off to someone else for ease or other reasons.
  • Duty to Enforce or Defend Claims: Protecting the trust from loss that could arise from claims or suits is another duty of the trustee.
  • Duty to Keep Trust Assets Separate: No matter what form the trust’s assets take, they should not mix with the trustee’s own assets. The assets belong to the trust, not necessarily to the trustee. 

It’s also important to know about the types of trusts that exist.

Revocable (Living) Trust vs. Irrevocable Trust

There are two different kinds of trust that the grantor can create and each will operate differently.

A living trust or revocable trust has terms the creator can change and modify after its formation. This means that beneficiaries can be added or removed by the grantor, or they can change how the assets in the trust are managed. 

An irrevocable trust has terms that can’t be changed or modified after its creation, except in the case where beneficiaries give their consent to do so. The trustee assumes control as soon as the trust is created, meaning that they also control the assets within. As a result, the grantor doesn’t own the assets once an irrevocable trust takes effect.

Just so you know, trusts become irrevocable after the grantor has passed away. It will then fall to the trustee to manage and distribute the assets, depending on the trust’s specific guidelines.

Which Trust is the Better Option?

You might have read about revocable and irrevocable trusts and thought that the latter sounded a bit rigid and inconvenient. However, there are two key advantages that an irrevocable trust holds over a revocable one (a living trust).

  1. Tax benefits are the first advantage of an irrevocable trust. While revocable trusts can be subject to estate taxes or be manipulated to pay off debts, irrevocable trusts are not subject to those same pressures.

  2. Assets in an irrevocable trust will be protected from creditors seeking payment of debts or liabilities. 

Grantors must decide to prioritize control of the trust or protection from outside expenses.

The Difference Between a Trust and a Will

The first difference between a trust and a will is the timing. A trust takes effect as soon as it is created, whereas a will is active after the one who created it passes. 

The second difference affects the probate process. If you or a grantor places a home in a trust, you can avoid the lengthy and expensive probate process. A trust is uncontestable and after the grantor is deceased, the trustee and benefactors can avoid probate - which is a huge advantage.

A will can provide a high level of detail when it comes to things trusts can’t control. This could be guardians of minors, funeral procedures, and distribution of anything not placed in a trust.

 Last will and Testament

An example of a will - via Cathrine Sæther

How to Sell Inherited Property in a Trust

When it falls to a trustee to sell a home in California, the conditions of the trust are vitally important. In the case of sole benefactors, they now own the home and are free to keep or sell the property.

Sometimes, selling the inherited home makes the most sense. 

Imagine a situation where the grantor has multiple adult children with no need to live in their inherited home. In cases like this, selling the home and generating a profit for the beneficiaries might be ideal for everyone involved. The trustee can sell the property and put the gains into the trust, which will now be divided among the benefactors. 

You’re in the Right Place for Advice

Whether you are a sole benefactor or one of many, you may want to sell your inherited property and put the proceeds toward other things. The Jamison Team has a lot of experience in this area, they’ve even written a free book that covers the entire subject.

Selling Inherited Homes Book

Current, but more importantly, useful advice for selling inherited homes

A Guide to Selling Your Inherited House is just that; a guide with effective advice from the professional’s perspective. It’s written by one of the top real estate duos in their local county of Santa Clara and the state of California. Would you like a free copy? Let us know where to send your edition and you’ll have the blueprints to inherited home sales in no time at all.

More Questions? Follow-up With Us!

If you have more questions about what to expect from the markets around the Bay Area, don’t be afraid to reach out to us today. Our experts are experienced in all property types and the entire San Francisco Bay Area, and we can help you to find what you need to know today.

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