The popularity of living trusts has been growing due in part to the increasing awareness of the probate process. Probate is a court process that oversees the distribution of a deceased person’s property. In California, probate often takes several years to complete and costs thousands of dollars. A living trust is a means of leaving property to named individuals after the death of the property owner without requiring probate. In California, the process of transferring real property to a living trust is fairly straightforward.
The process of transferring property to a living trust is called “funding.” Think of a living trust as a box. When you sign your living trust document, you create the box. You put property into the box along with your living trust document, which provides the instructions for what happens to that property when you die. Upon your death, the person you selected to be in charge of your trust, called the “successor trustee,” reads the instructions in your trust document, and distributes the property according to those instructions. Only property held in the box passes under the instructions of your trust document. If you instruct your successor trustee to transfer your real estate to someone, the trustee can only do so if you have transferred the real estate into your trust. It is for this reason that transferring real estate into your trust is critically important.
The Grant Deed
A grant deed is commonly used to transfer title to real estate to a living trust in California. To fill out a grant deed, you need a copy of your current deed, meaning the deed under which ownership of the property was transferred to you. Locate the assessor’s parcel number, sometimes referred to on deeds as the APN, the legal description of the property, and the way in which you hold title, on the deed. The way in which you hold title is listed under the “grantee” section of the deed. For example, title might read: “John Smith, a single man,” “Sarah Jones, a widow,” "Bob and Sue Jones, as community property,” or “Bob and Sue Jones, as joint tenants,” to name but a few possibilities. List the way in which you hold title under the “grantor” section of the new deed. From the above example, John Smith would write, “John Smith, a single man.” Write the name of your trust under the “grantee” section of the new deed, such as “The John Smith Living Trust.” Copy the APN and the legal description from the old deed to the new deed.
The Preliminary Ownership Report
Real property owners are often concerned about their property taxes increasing if they transfer their property into a living trust. Under California law, a county tax assessor’s office may reassess the value of real property upon a “change of ownership.” California law exempts the transfer of property to a living trust from the definition of a “change of ownership” if the property owner transfers the property to the owner’s own trust. The property owner must inform the assessor’s office that the exemption applies, however, or else the assessor will likely reassess the property. This notice is given with a document called a Preliminary Change of Ownership Report. Although each county has its own form, any county’s form may be used throughout the state. The form is free of charge at any assessor’s office.
Signing and Recording
The deed transferring your home into the living trust is effective only if you sign it. In California, only the person transferring ownership signs the deed. Since you own the property, you must sign the deed. Sign the deed with your name exactly as it appears on the original deed, meaning the deed under which you received the property. For example, if your middle name is used on the original deed, sign with your middle name. If your middle initial was used, sign with your middle initial. If your name ends with “Jr.” or “Sr.,” sign with that suffix only if it was used on the original deed. Sign the deed before a notary public. Although it's not required to transfer the property into the trust, deeds are traditionally recorded. Deliver both the signed deed and the Preliminary Change of Ownership Report to the county recorder’s office in the county in which the property is located. There is a small recording fee that periodically changes and varies by county. The recorder’s office will forward the Preliminary Ownership Report to the assessor’s office and return the deed to you by mail after it is recorded.
- California Revenue and Taxation Code Section 60
- California Revenue and Taxation Code Section 62(d)
- California Code of Regulations Section 462.160(b)(2)
- Action Guide: Funding a Revocable Trust; Continuing Education of the California Bar