Dear Len & Rosie,
What are the steps in selling my deceased mother’s home, which was in her trust? I am the successor trustee. The trust directs that the home be sold and the proceeds are to be split equally among myself and my two sisters.
Iss the home sold directly from the trust? Do real estate agents know how to do this? When the home is sold, does the escrow company make the distributions to the three of us separately? What, if anything, should the three of us report to the IRS on our individual income taxes?
Welcome to Trust Administration. It’s a lot faster than probate, and it’s much less expensive too, but it’s just as complicated. What you really need to do is to hire an attorney to represent you as trustee.
The first step involved is to get you on the title to the home. This involves recording an Affidavit of Death of Trustee with the County Recorder together with your mother’s death certificate. Property Tax forms also have to be submitted to the County Assessor to ensure that the home won’t be reassessed until its eventual sale.
Once you are on title, you can hire a realtor, list the property for sale, and sell it. When the property sells, the proceeds of sale should be electronically deposited into an account in your name as trustee of your mother’s trust, under a taxpayer identification number (EIN) obtained from the IRS. Other trust assets would also be consolidated into trust accounts in your name as trustee.
After the sale, you can propose a distribution to your sisters. If they are cooperative, they’ll waive an accounting, saving the trust from having to pay a bookkeeper to prepare one. After the accounting is either waived or approved by the beneficiaries or the court, you can then make a distribution equally to all three of you, while maintaining a reserve for taxes, fees and costs, and unanticipated expenses. As a general rule, once you give money to your sisters, you aren’t getting it back, so keep a sufficient reserve to cover your costs.
Your mother may require a final income tax return for the year of her death. In addition, the trust will have to file an income tax return, if only because of the sale of the home. There isn’t likely to be much in the way of taxes due, however, as the home should receive a cost basis adjustment as a result of your mother’s death. In the following year, after you have completed the tax returns, you can distribute the remaining funds in equal shares.
That’s it in an nutshell. There are a number of other issues to deal with, including trustee fees, IRA’s, life insurance, potential Medi-Cal estate claims, transferring your mother’s automobile, etc. That’s why we recommend you hire an attorney to represent you in this process, because it’s easy to make mistakes that can cost money and make things more difficult for you and your sisters.
Len & Rosie
Dear Len & Rosie,