Legal Question in Real Estate Law in California
trust distribution and real property
My mother passed away
8/17/07 and left us four
children as equal
beneficiaries of her trust.
There is a money market,
a piece of property we are
trying to sell, and another
piece of property that
only two of us want to
keep. The trust does not
stipulate how it is to be
divided, just that it is to
be divided into equal
parts. How long can we
keep everything in the
trust? Distribution really
depends on what we get
for this piece of property.
Would it be wise to have
both properties
reassessed since the
market has dropped so
dramatically in the last
six months? Would this
give us a capital loss
when the house does sell
if it sells below appraised
value? Is there a limited
timeframe from the day
of death to when you can
have the property
reappraised for tax
purposes?
1 Answer from Attorneys
Re: trust distribution and real property
To give basic and non-situation-specific comments on the individual questions asked:
Unless the terms of the trust require otherwise, it can remain in place and continue to hold estate properties indefinetly, but the trustee should work diligently to (1) ascertain and carry out the trustor's intent, and (2) discharge his or her duties as a trustee faithfully and in the best interests of all beneficiaries. If the trust is large, or the beneficiaries are not in full agreement on strategy, the trustee should get professional advice from an attorney who handles administration of estates.
When real property that is not readily subdivided is left to multiple heirs, the trustee has two possibilities: to sell and divide the proceeds, or to deed the parcel to the heirs as tenants in common (or if all agree, as joint tenants). The terms of the trust would govern, and if it is silent, then the wishes of the heirs would control.
There is a special form of legal action called a "partition" which allows one or more co-owners to sue to force a sale and split of the net proceeds; quarreling heirs account for a large percentage of the partition suits filed (another large segment is separating unmarried couples who bought together when they were in love). The trustee should try to obtain consensus to avoid setting up a partition situation.
If proper valuation of assets is necessary for a fair distribution, by all means get an appraisal from an appraiser with experience in making appraisals that will be used for this purpose. The standards and principles may differ from those used to make appraisals for loans.
If you were to ask a tax advisor, which I am not, about the capital loss situation, I'm guessing the advisor would say the heirs would indeed have reportable capital losses.
For this reason, you may need a forensic appraisal based on the 8/17/07 value as well as current market value.
I don't know the answer to the last question, but I'd think the sooner you have the 8/17/07 appraisal made, the more credible it would be and the better information the trustee will have for making decisions.
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