Selling real property held in a California trust requires compliance with state laws and trust-specific guidelines. Below is a list of some of the key steps to help avoid setbacks in California:
Review The Trust Agreement: Understand the terms of the trust and the authority granted to the trustee. Some trusts may have specific restrictions or conditions for selling a particular property.
Confirm Title: Verify that the property has been recorded in the name of the trust, if not, further action may need to be taken such as, a court petition.
Notify Beneficiaries: California doesn’t mandate formal beneficiary notification for real estate to be sold, it is best practice to communicate with beneficiaries to avoid disputes.
Resolve Tax Considerations: Consult a tax professional to address potential capital gains or step up in basis rules, which can significantly impact the tax obligations of the trust and beneficiaries.
Disclosures: In California, most real estate transactions require sellers to provide comprehensive disclosures to buyers, ensuring transparency about the property’s condition. However, trustees selling property held in a trust are often exempt from some disclosure requirements under specific circumstances. Listed below are examples of California disclosures that may not apply to a trust sale.
1. Transfer Disclosure Statement (TDS)
* Exemption: If the seller is a trustee who has never lived in or personally managed the property, they are exempt from providing the TDS. ( California Civil Code 1102.2)
2. Seller Property Questionnaire (SPQ)
*Exemption: Trustees who have not lived on the property are typically exempt from completing the SPQ, which asks for specific detailed information about the property’s condition and history.
Death on the Property (within the last 3 years)
* Exemption: Trustees are not required to disclose a death if they were unaware of it or did not personally manage the property.
Trustees benefit from exemptions when they lack direct knowledge of the property, yet they still have a fiduciary duty to act in good faith and disclose material facts that could affect the properties value, safety or desirability.
