What Do I Do With My Parent’s Trust When They Die?

Handling a trust as a successor trustee comes with a wide range of responsibilities, including managing property taxes. Understanding how property tax laws apply in California, particularly in Riverside County, is essential to avoid unnecessary expenses and ensure a smooth property transfer.

Understanding Property Tax Transfers

In California, property taxes are governed by Proposition 13, which limits property tax increases but reassessments can still occur upon property transfers. However, certain exclusions can prevent significant tax increases when transferring property within a trust.

Parent-Child Exclusion (Proposition 19)

If you inherit a property as a successor trustee, you may qualify for a parent-child exclusion under Proposition 19, which allows you to transfer a primary residence without a tax reassessment, provided you meet eligibility requirements. This can save thousands of dollars in increased property taxes.

Avoiding Unnecessary Reassessments

Trust administration can trigger a property tax reassessment if the transfer does not qualify for an exclusion. To avoid this:

• Ensure the trust is structured correctly before the original owner passes away.
• File the appropriate claims with the Riverside County Assessor’s Office within the required timeframe.
• Work with an experienced estate or real estate attorney to navigate legal nuances.

Tax Implications When Selling a Trust Property

As a successor trustee, if you decide to sell a property within the trust, there are key tax considerations:

Capital Gains Tax & Step-Up in Basis

One major advantage of inheriting property through a trust is the step-up in basis. This means the property’s tax basis is adjusted to its fair market value at the time of the owner's death, significantly reducing capital gains taxes when selling.

For example, if a parent purchased a home for $200,000 but it was worth $600,000 at the time of their passing, the new tax basis would be $600,000. If you sell the property for $610,000, your taxable gain would only be $10,000 instead of $410,000.

Trust Tax Returns

Depending on the trust type, you may need to file a trust tax return (Form 1041) for any income earned before the assets are distributed. Consulting a tax professional ensures compliance and helps minimize tax liabilities.

How We Can Help

Navigating property tax laws as a successor trustee can be complex, but you don’t have to do it alone. Our experienced team specializes in trust administration and real estate transactions in Eastvale and throughout Riverside County. We can help you:

• Determine eligibility for property tax exclusions
• File required tax forms and avoid reassessments
• Strategize the best approach for selling or transferring trust property
• We will set up a FREE TRUST when start working together

Get a Free Trust Setup!

Sell your property with us, and we’ll help you set up a trust at no cost. Contact Real Estate Eastvale at 909.255.1126 to get started!