Inherited Property: Lifetime Right of Occupancy: Title & Property Tax Questions

[Inherited_Property]

Jurisdiction

California

There was a revocable living trust. If 3 people inherited a single family residence. 2 are children and 1 is a grandchild of the deceased.

Property Title Questions:

Does the trust take title or would title be put in the name of the beneficiaries ?

In the trust it says nothing will be distributed until the lifetime occupant stops living in the house. Not sure if taking title and distribution are different or the same thing.

Property Tax Questions:

If the trust takes title, does the property get reassessed ?

 

[adjusterjack]

Does the trust take title or would title be put in the name of the beneficiaries ?

The trust should already have title to the property. In other words, when the deceased (let's call him Daddy Smith) created the trust while he was alive the property should have been deeded to the trust then and the deed should show the name of the trust as owner.

Upon the death of Daddy Smith, the trustee of the trust would follow the terms and conditions of the trust.

If the terms and conditions of the trust left the property to the beneficiaries (A. Smith, B. Smith, and C. Smith) with a "life estate" (or some other condition) for C. Smith, then the trustee would issue a deed conveying the property to A. Smith, B. Smith, and C. Smith and the deed would specify the "life estate" or other condition involving C. Smith.

In the trust it says nothing will be distributed until the lifetime occupant stops living in the house.

If that's really what the trust says, then somebody did a piss poor job of writing it because that puts the estate in limbo for the life of the lifetime occupant.

I suspect that there is a lot more to the terms and conditions of the trust than what you are paraphrasing.

Do you have the trust papers in front of you?

My guess is that the trust allows the conveyance by life estate deed and upon the death of the "life tenant" the "remaindermen" get control of the property.

If you are the trustee and don't understand the terminology I have been using then you would be wise to seek assistance from a trust attorney.

If the trust takes title, does the property get reassessed ?

Again, the trust should already have title.

As for whether the property gets reassessed upon conveyance to the beneficiaries you should easily be able to find that out on your taxing authority's website.

 

[Inherited_Property]

The trust should already have title to the property. In other words, when the deceased (let's call him Daddy Smith) created the trust while he was alive the property should have been deeded to the trust then and the deed should show the name of the trust as owner.

Thanks. That is probably the case then. I will check.

Upon the death of Daddy Smith, the trustee of the trust would follow the terms and conditions of the trust.

If the terms and conditions of the trust left the property to the beneficiaries (A. Smith, B. Smith, and C. Smith) with a "life estate" (or some other condition) for C. Smith, then the trustee would issue a deed conveying the property to A. Smith, B. Smith, and C. Smith and the deed would specify the "life estate" or other condition involving C. Smith.

In this case there are 3 beneficiaries. The spouse is not a beneficiary but has a life estate.

If that's really what the trust says, then somebody did a piss poor job of writing it because that puts the estate in limbo for the life of the lifetime occupant.

I am not sure what you mean by "limbo". But the intention was to provide a lifetime right to occupancy. The way I see it, that puts everything in limbo on purpose, not necessarily a bad job of writing it, but maybe something I am missing ?

I suspect that there is a lot more to the terms and conditions of the trust than what you are paraphrasing.

Do you have the trust papers in front of you?

Yes I do. Is there another section to read ? I read this part under the lifetime right of occupancy section.

My guess is that the trust allows the conveyance by life estate deed and upon the death of the "life tenant" the "remaindermen" get control of the property.

What does that mean in the case of 3 beneficiaries and a surviving spouse who is not a beneficiary, but has the lifetime right to occupancy ?

3 beneficiaries get put on the deed as a result of conveyance by life estate deed ?

They have no ownership though ?

Or do they own, but no control ?

If you are the trustee and don't understand the terminology I have been using then you would be wise to seek assistance from a trust attorney.

I am not the trustee. However I know the trustees are not sure what to do. We will seek an attorney. We would like to understand as much as possible.

Again, the trust should already have title.

I think it does. I guess I was thinking about what changes need to be made now.

As for whether the property gets reassessed upon conveyance to the beneficiaries you should easily be able to find that out on your taxing authority's website.

Is conveyance different than distribution ?

I see distribution mentioned at the termination of the lifetime right of occupancy.

Thanks!

 

[army judge]

A life estate allows the named beneficiary to reside on the property until he/she dies.

During the life of the named party, she/he can live without cost (in many cases the estate will pay all taxes and fees) such that the party can enjoy the rest of their life in the named abode.

Upon the death of the named party, the remainder of the estate passes to the named grantee(s) in "fee simple", usually.

 

[adjusterjack]

In this case there are 3 beneficiaries. The spouse is not a beneficiary but has a life estate.

The deed conveying the property from the trust to the beneficiaries should specify that the spouse has a life estate in the property.

I am not sure what you mean by "limbo". But the intention was to provide a lifetime right to occupancy.

A lifetime right to occupancy and a life estate are two different things.

See the following brief explanation:

What is the Difference between a Life Estate and a Right to Occupancy?

Are you quoting the trust document word for word when you write "lifetime right of occupancy"?

The way I see it, that puts everything in limbo on purpose, not necessarily a bad job of writing it, but maybe something I am missing ?

Not necessarily. I suppose that a trust can exist for decades beyond the maker's death for the purpose of administering property until the time for its conveyance, but that would be rather cumbersome. It's more likely that the terms of the trust are designed to be completed within a short time after death.

What does that mean in the case of 3 beneficiaries and a surviving spouse who is not a beneficiary, but has the lifetime right to occupancy ?

3 beneficiaries get put on the deed as a result of conveyance by life estate deed ?

Now you are confusing me by using lifetime right to occupancy and life estate deed interchangeably. Please figure out which one the trust is specifying and use only that terminology.

But, yes, the trust conveys (by deed) the ownership of the property to the 3 beneficiaries and specifies that Mrs Smith has a life estate or lifetime right of occupancy (whichever applies). The deed may also specify other applicable terms of her occupancy if appropriate.

They have no ownership though ?

Yes, they have ownership.

but no control ?

Depends on the terms of the trust that get incorporated into the deed.

I am not the trustee. However I know the trustees are not sure what to do. We will seek an attorney. We would like to understand as much as possible.

An attorney shouldn't cost too much to just prepare the proper deed for the signatures of the trustees.

I think it does.

(Referring to the trust owning the property.) The way to make sure is to get a copy of the last recorded deed from the County Recorder.

Is conveyance different than distribution ?

Might be, might not be. Depends on the terms of the trust.

I see distribution mentioned at the termination of the lifetime right of occupancy.

That's obviously not a direct quote of the terms so it could mean a distribution of rights as opposed to a distribution of ownership. Just guessing there.

 

[Inherited_Property]

The deed conveying the property from the trust to the beneficiaries should specify that the spouse has a life estate in the property.

OK thanks.

Are you quoting the trust document word for word when you write "lifetime right of occupancy"?

Yes. Lifetime right of occupancy are the exact words. No lifetime estate mentioned.

Not necessarily. I suppose that a trust can exist for decades beyond the maker's death for the purpose of administering property until the time for its conveyance, but that would be rather cumbersome. It's more likely that the terms of the trust are designed to be completed within a short time after death.

Interesting. It says "property shall be distributed in equal shares free of trust when the lifetime occupant ceases to occupy the residence". Not sure what that means as conveying the deed. Do we wait or do it now ?

Now you are confusing me by using lifetime right to occupancy and life estate deed interchangeably. Please figure out which one the trust is specifying and use only that terminology.

It is lifetime right to occupancy. That is the only one I have used, I believe.

But, yes, the trust conveys (by deed) the ownership of the property to the 3 beneficiaries and specifies that Mrs Smith has a life estate or lifetime right of occupancy (whichever applies). The deed may also specify other applicable terms of her occupancy if appropriate.

I just wonder if that is done now or when lifetime right of occupancy ends.

An attorney shouldn't cost too much to just prepare the proper deed for the signatures of the trustees.

We will see one soon. We want to be knowledgeable so we will be able to understand and communicate on this matter.

(Referring to the trust owning the property.) The way to make sure is to get a copy of the last recorded deed from the County Recorder.

The trust does own it. I just looked at it.

That's obviously not a direct quote of the terms so it could mean a distribution of rights as opposed to a distribution of ownership. Just guessing there.

It just says "distributed, in equal shares and free of trust". This again is when the lifetime right of occupancy ceases.

 

[adjusterjack]

At this point you will need to have the trust documents examined in its entirety by an attorney to determine when and how the property can be deeded to the beneficiaries.

Here's a more comprehensive analysis that illustrates why it's time for an attorney to take over the discussion:

The Importance of Distinguishing Between the Right of Occupancy and a Life Estate - California Lawyer

It's an excellent analysis because it cites case law and statutes. I don't find that very often on websites.

It does appear, from that analysis, that the trust continues to own the property for the duration of the lifetime right to occupancy.

Note that the article makes suggestions on how a trust should be written in contemplation of the contingencies of a lifetime right of occupancy.

That should give you an idea of what to look for in the trust documents to see if those contingencies were adequately addressed.