Wills, Trust and Probate transferring real property upon death the basics

The most common means of transferring real property upon death of the owner are three well-known methods:

1. Holding property in joint tenancy or as community property with right of survivorship
2. A living trust
3. A will

To transfer or inherit property after someone dies, you must usually go to court. If the property is in a Will, probate will be needed in California to deal with transferring the title of the property in escrow. If the property is in a living trust, the trust holds the property and no court is needed to transfer ownership.

The 5 main types of Wills to deal with real estate after the testator (the person who has made a will) dies.

1. Simple Will

A simple Will is when the testators, a person who has made a Will, decide who will receive your assets and also name a guardian for any minor children. The simple will is a form of Attested Written Will. Writing a simple will can be done by checking out online examples. Also preformed wills can provide a good framework for a basic simple will. Be it is always the best idea to seek legal advice. You may think your life and assets are simple, but only an experienced law professional will know for sure. In California most Wills will need to go into probate.

2. Testamentary Trust Will

A testamentary trust Will places some assets into a trust for the benefit of your beneficiaries and names a trustee to handle the trust. This type of Will puts assets in trust and places conditions on the inheritance. Some ways a testamentary trust Will is used is to grant the assets on a gradual basis based on age or other factors. Real estate will need to go through the probate process to sell in Sacramento and all of California.

3. Joint Will

A joint Will is signed by two or more people as a separate Will for each testator. The joint Will merges their individual wills into a single, combined last Will and testament. The key drawback issue with a joint Will is the terms of joint wills like executor, beneficiaries, and other provisions cannot be changed even after the death of one of the testators.

Married couples that create a joint Wills often have these 2 statements:

1. After one spouse has died, all the couple’s property will be left to the surviving spouse.
2. After the surviving spouse dies, the remaining property will be left to the couple’s children.

4. Living Will

A living Will states your end-of-life health care decisions so there’s a record of them. Also called an Advance Healthcare Directive, a Living Will is good for end-of-life planning and to make your wishes known regarding medical care you may want in the future. Just a quick note a living Will is not a living trust.

5. Pour-Over Wills

Pour-Over Wills should be part of a Revocable Living Trust. The Pour-Over Will safeguards remaining assets and will automatically be transferred to a previously established trust upon their death. Pour-Over Wills cannot be used by themselves.

How can a will be created?

1. Holographic Will is written entirely in the handwriting of the person writing the Will.
2. Standard Will is formal typewritten printed or typed not digital and is printed out to be signed and witnessed. This is a form of Attested Written Will.
3. Partially handwritten and partially typed Wills also need to be printed in a way that can be signed and witnessed. This is a form of Attested Written Will.
4. Nuncupative Wills are a verbal explanation that expresses final wishes. Many states including California do not accept a verbal sometimes called oral Will.
5. Online Wills may work well for estate planning but they may not have the legal standing to make the testators wishes fulfilled. Check the local requirements before using this Will make process as the real life Will.
6. Deathbed Wills are made on a deathbed and under dire circumstances often create questions about mental stability and how comprehensive it is.

What are California’s last will and testament requirements?

1. California code states -individual 18 or more years of age who is of sound mind may make a Will.
2. The sound mind and memory is a legal issue when forming a Will. The California code states this issue in negative terms like an individual is not mentally competent to make a Will if…
   1. The individual does not have sufficient mental capacity to be able to do any of the following:
      1. Understand the nature of the testamentary act.
      2. Understand and recollect the nature and situation of the individual’s property.
      3. Remember and understand the individual’s relations to living descendants, spouse, and parents, and those whose interests are affected by the Will.

To understand the section in full could be important if there are issues of mental health disorder, mental incompetence and conservatorship.

3. California makes it clear that the Will must be made freely and voluntarily. The undue influence protects the will creator/ testator (Testators: a person who has made a Will) from pressure or control of caretakers or family members.  Section 6104 states – The execution or revocation of a Will or a part of a Will is ineffective to the extent the execution or revocation was procured by duress, menace, fraud, or undue influence.
4. A will must be in writing; it cannot be oral. California does not recognize oral (or “nuncupative”) wills. At this time a digital copy, even a PDF of a will saved on a computer isn’t considered valid under California law. I don’t know what the effect of digital signatures like DocuSign have on this state of affairs.
5. The will must be signed. The California probate code states:
   1. The will shall be signed by one of the following:
      1. By the testator.
      2. In the testator’s name by some other person in the testator’s presence and by the testator’s direction
      3. By a conservator pursuant to a court order to make a will under Section 2580.

The signing of the will is a big part why a will cannot be oral or just in a digital format.

6. The will must be signed and witnessed by at least two competent, disinterested witnesses, who also sign at the same time. A disinterested witness is when they don’t receive any financial benefit in the will. California probate code states – And more detail legal issues in the link provided.
   1. Any person generally competent to be a witness may act as a witness to a will.
   2. A will or any provision thereof is not invalid because the will is signed by an interested witness.
   3. Unless there are at least two other subscribing witnesses to the will who are disinterested witnesses, the fact that the will makes a devise to a subscribing witness creates a presumption that the witness procured the devise by duress, menace, fraud, or undue influence. This presumption is a presumption affecting the burden of proof. 

California’s last will and testament requirements are the key to having  the will accepted by the government. Follow all the requirements and get legal help because not every estate issue is covered in just this part of the code. Things can get complicated. If you want your property and last wishes to be fulfilled correctly, make sure all the requirements are met for your estate.

The will’s ability to deal with real estate after the testator dies is probate. The probate is the way a property ownership is transferred to a new owner.

How does probate deal with real estate after someone dies that owns real estate?

In California, probate is the means that a court deals with these 5 key real estate issues. There is a probate timeline to sell property.

1. First, the probate court decides if a will exists and if it is valid.
2. It must figure out who are the decedent’s heirs or beneficiaries of the estate.
3. The court must find out how much the decedent’s property is worth.
4. Probate also directs the estate to take care of the decedent’s financial responsibilities.
5. The probate court oversee the Transfer of the decedent’s property to the heirs or beneficiaries or if sold to the new owner. If the property is sold, there is a clear process for how to sell a probate property.

How do living trusts and other trusts deal with real estate?

Living trust 

A Living Trust is a legal tool for financial planning that allows a person (Trustee) to hold another person’s (Trustor ‘s) property for the benefit of someone else (Beneficiary). Unlike a testamentary trust, a Living Trust goes into effect during the settlor’s lifetime. 

It is acceptable in a living trust for the settlor, trustee, and beneficiary to be the same person. If you set up a Living Trust, you can be the settlor, the trustee and the beneficiary of the trust. The point is, you keep full control over the assets and properties and have the right to use and spend that property as if it had never been put into the trust.

What do the Trustor, Trustee and Beneficiary mean?

Trustor

The Trustor (also known as a “Settlor” or a “Grantor”) is the person who creates the Trust. The settlor is the party that creates the trust. The Trustor is the donor or the person who puts the assets into the trust. The Trustor gives the initial trust property to the trustee. The Trustor transfers the legal title to the trust. The Trustor provides in the trust instrument how that trust property is to be used for the beneficiaries. The trustor can also be called the donor, grantor, and trustmaker.

Trustee

A trustee is the party or parties designated as a holder of the property. The trustee is charged with the duty of administering the trust. The trustee acts as the legal owner of trust assets, and is responsible for handling any of the assets held in trust, tax filings for the trust, and distributing the assets according to the terms of the trust.

Beneficiary

The trust beneficiary is the individual or group of individuals for whom a trust is created. This means that the trust’s property will either be distributed to them outright, or held in trust for their benefit. Under a Trust or Will, an heir’s rights to an inheritance are literary clearly written. A beneficiary is a person who’s legally named (by the Trustor /owner) to receive property from an estate.

The two types of trusts

1. Revocable Living Trust

The revocable living trust or simply a living trust can be modified after they are created. The revocable living trust can be changed as circumstances or wishes change. Revocable living trusts are “living” because they are made during trustor’s lifetime. “inter vivos” is a legal term some lawyers use to describe a living trust.

2. Irrevocable Living Trust

An irrevocable trust describes a trust that cannot be modified after it is created without the beneficiaries’ consent. No changes to an irrevocable trust may be made except rare circumstances. 100% consent of the trust beneficiaries would have to agree to any alterations or by order of the court. The testator cannot change the irrevocable trust unilaterally.

Irrevocable trust structure is used mainly for tax purpose. Irrevocable trusts remove the benefactor’s taxable estate assets, meaning they are not subject to estate tax upon death.

What are 6 top reasons to set up a Living Trust?

1. To avoid probate – If all your property is in trust when you die (or become incompetent), then legally you don’t own anything in your name. This means, if you die, no probate (formal court administration of a decedent’s estate) is needed to pass your property on to your beneficiaries.
2. Tax Planning – A Living Trust can help avoid or reduce estate taxes, gift taxes and income taxes. The key is setting it up correctly and having the assets in the living trust.
3. Control of the assets – Like a Will and a testamentary trust, a Living Trust lets you decide specifically what will happen to your property after you die.
4. Protection against Creditors– This is not a get out of creditor issues free card. The trusts can give assets to the beneficiaries and protect those assets from the beneficiaries’ creditors. But a Living Trust does not shelter the settlor from creditors. A creditor of the settlor has the same right to go after the trust property as if the settlor still owned the assets in his or her own name.
5. Privacy – Privacy is five on this list but with many people who begin a trust this is number one. A trust is not a public record. So, the general public or anyone who is not a beneficiary does not have a right to know about the assets in your trust. This is not like a probated estate.
6. Provides For Minors Or Dependents With Issues Of Concern – Grantors also enjoy the option to tailor the terms of a revocable trust to make sure that loved ones are provided for. A grantor with minor children or a dependent with a disability must also create a will to appoint a guardian (someone who will look out for these dependents) for their minor children.

The Pour-over Will is very important to living trust effectiveness.

A “Pour-over Will” is a big key to the Living Trust doing all the settlor wants it to do. The Pour-over Will is a back-up for any property that might not have been properly transferred to the Living Trust during the settlor’s lifetime.

Without a Pour-over Will, any property acquired after you set up your Living Trust that inadvertently is listed in your name rather than in the name of your trust would normally pass to your heirs as determined under California State law, who may or may not be the same people that you name in your trust to receive your assets at your death. The Pour-over Will will ensure that any such assets will be added to your trust so that they will be ultimately distributed to the beneficiaries you name in your trust. Probate could get involved with the estate depending on what types of assets are not established in the living trust.

If all the assets and properties are in the living trust, the Pour-over Will will not go into effect. It would be the safety measure that it was set up to be.

Real estate issues and a revocable living trust

When a revocable living trust is created, the testator can appoint them self as trustee. This will give the testator the full power to manage the trust property. The testator transfers ownership of some or all of their property to the trust with them self as trustee.

1. The testator keeps absolute control over the property held in trust.
2. The property can be sold.
3. The property can get a mortgage or refinance it.
4. The property held in trust can be given away.
5. The ownership of trust property can be put back in the testator’s own name.
6. There can be properties added to the trust.
7. The beneficiaries can be changed.
8. The successor trustee can be changed.
9. The trust can be revoked completely.

What if a property has a mortgage when the owner dies?

When a homeowner dies, inheritance of the home is typically decided by a will with probate or a living trust. With mortgage debt, however, the process is different.

The person who inherits the home could decide to keep the home and take over responsibility for the mortgage. There are laws in place that allow them to do so. It is the best practice to keep making the mortgage payments until the details of the lender and new ownership are worked out.

If the mortgage payments are not made, the mortgage servicer will begin the process of foreclosing on the property.

The reverse mortgage is not like other mortgages.

If there was a reverse mortgage on the property, the loan amount becomes due after the death of the borrower. If the heir to the home wants to retain the property, they’ll have to pay back the loan. They can pay with their own funds or get a standard mortgage to repay the reverse mortgage. There is a strict timeline with a reverse mortgage. We have a full article about Time is the Most Important Issue When Inheriting a House with a Reverse Mortgage check it out.

The reverse mortgage company can sell the home if the terms of the loan are not met.  The heirs can turn the deed over to the reverse mortgage servicer to satisfy the debt. This results in reverse mortgage foreclosure.

One of the very first actions to take if you inherit a property is to check if there is a reverse mortgage. The reverse mortgage timeline is hard to deal with. If the property needs to be sold, time on the market can eat up much of that time. If you need to sell and the property is in a will, the time to get the authority and right to sell from the probate court could be a major issue. A cash offer to buy the property can make the transfer easier. If the property is in a living trust, get an agreement from all the beneficiaries quickly to sell the property or find financing to remove the reverse mortgage.

Understanding all the issues of a property in a Will, Probate and living trust is no small task. learn more about What to do with inherited property? The more you know will only help you deal with all the real estate issues aspect of the situation. As always, my heart goes out to you for the loss that started the process of inheriting property. If there is anything we can do at Coffee Real Estate just contact Dan Parisi. We are here to help.

This website is designed for information only and is not intended to offer legal advice.