Legal Question in Wills and Trusts in California

Re: Out of State Trust

Check with a California attorney to see if the property was transferred to the trust, if this itself, would generate the California tax. My belief is that since the trust benefits your grandmother, even though considered a NJ trust, that the transfer would not generate the tax, since she is only changing the title registration to her own trust, not making a gift or being a sale. If this is done, without tax, the trust would own the house for the benefit of successor beneficiaries. However, while this may avoid CA probate, the house would still be part of her estate for federal and state death taxes (if her estate is of sufficient size) and would generate an income tax (capital gain) if sold by the trust prior to her death. The only way the income tax could be avoided is if she owned it (although in trust) and it was inherited by the beneficiaries of the trust. This gets a little complicated, comparing capital gains taxes to possible estate (death) taxes and a comparative tax calculation would be required to determine which would be less, to determine the best solution.

Re: Out of State Trust

I agree with you. Since the property is in California I would speak with an attorney in Califonia to make sure the NJ Trust meets Calif. requirements to avoid taxes & probate. If you have a NJ attorney he should be able to contact an attorney in Calif. Good luck.