The names are fictitious, but the story is, unfortunately, very real. This is an example of the way in which a simple legal procedure would have saved prolonged anguish and still-uncalculated expense. In my experience, I find many of these kinds of situations where people wait too long for a wide range of legal services.
Proper estate planning
Laurie and Rhonda inherited a condo from their father Phil, who had a good estate plan with a revocable living trust in which he held title to his property. The trust appointed Rhonda as successor trustee and gave the condo equally to the two siblings.
After Phil’s death, it was the responsibility of Rhonda as trustee to make sure that the property was re-titled in the names of the two siblings, filing the correct paperwork with the County Assessor’s office to allow them to enjoy an exemption from property tax reassessment because this was a parent-to-child transfer.
Paperwork must be filed to ensure title transfer for legal owner
But nine years after Phil’s death, Rhonda still had not filed the correct paperwork with the county, despite several warnings. By then, sister Laurie had been living in the condo for about seven years, enjoying all the amenities of the gated community in which their father had lived the last 20 years of his life.
The corporation that owns the gated community has a policy that only legitimate owners can occupy the residential units. Because Rhonda never completed the paperwork necessary to transfer title of the condo to herself and Laurie, eventually the county assessor’s office reported the discrepancy to the corporation. After several more warnings, they began a process to revoke the right of Laurie to continue living in the property. Rhonda and Laurie then had to scurry around to assemble the proper documents and finally transfer title to themselves. For a number of months, Laurie was in danger of being evicted from the home her father had left to her.
All of this could have been avoided if successor trustee Rhonda had carried out her duties as trustee. Because trust administration is generally done outside of court supervision by nonprofessional relatives of a decedent, a named successor trustee often does not understand her or his duty to carry out the wishes of the decedent under the terms of the trust.
Holding property in a trust to avoid probate
The point of holding property in a trust is to provide for a smooth and cost-effective transfer of property and to avoid probate. This does not mean that one can ignore the terms of the trust instrument or the laws of the State of California regarding transfers of title to property, let alone the local rules of a condo association or residential community.
Following Phil’s death, Rhonda should have sought legal advice about how to administer the trust. Attorney’s fees in trust administration are usually a fraction of the cost of going through probate, and the costs can be further reduced if the trustee is well organized and does most of the work her or himself.
The moral of this story? Simple and proper trust administration can save a lot of money and prevent disruption for everyone concerned.