Consider this scenario: a married couple bought a house in California many years ago. Advised by a savvy real estate agent, they saw an estate planning attorney right away and created a family trust. In the trust, they have specified who gets their assets once they both pass away.
The couple had three children. Years later, the husband died. Another decade went by, and the wife passed away as well. The children knew that their parents had a living trust set up, but this was done years ago. Now, they can’t find it.
Currently, two children live out of state, while the third one – the daughter – lives in California. They have their own properties, and their lives are well established, so the children get together and decide to sell the parents’ house.
Since their parents had a living trust, they expect a smooth, quick process. They hire a real estate agent. The agent pulls up the grant deed—the house is in both parents’ names. The real estate agent, the children and a title rep get on a phone call. The title rep is asking who the successor trustee is. The children are not sure.
“What does the trust say?” asks the title rep.
“Well, we’re not sure where the trust is”, responds one of the children.
They already searched the parents’ house and did not find the trust. What happens next is, unfortunately, a common situation.
Is Your Trust Recorded? Does County Recorder Have It?
One of the children asks the title rep: “Doesn’t the title company have a copy of the living trust?”
The title rep explains that, no, they would never have a copy of a living trust because California living trusts are private documents. Surprised, the children call the local County Recorder’s Office. Surely, they should have a copy. After all, it’s such an important document, it must be recorded somewhere, right? Wrong!
The County Recorder would not have a copy of a living trust for the same reason a title company doesn’t have it: a living trust is a private document and is never recorded. You wouldn’t record your lease agreement or any other contract between private parties, right?
Normally, each party retains a copy of the signed contract and, in case there’s a dispute, they can go to court and resolve it. A living trust is no different, except that in a living trust, the settlor (the person creating a living trust) is also a trustee and beneficiary until he or she passes away. Then, as instructed by the living trust, a successor trustee takes over.
Is Estate Planning Attorney Obligated to Safeguard Your Trust?
One of the children thought they knew the name of the attorney who set up the living trust, so he decided to call the attorney’s office. Initially, the office declined to discuss this matter because of privacy issues. How is the attorney supposed to know that they are talking to the people named in the trust? How would you feel if your attorney revealed the private trust information to just anyone who called?
Finally, the attorney checked their records and did not find a copy of the family trust in question. Even if you know the attorney’s name, you should never rely on your lawyer to safeguard one of your most important documents. The attorney can pass away. Sell the practice to someone else. Move. The records may get lost in a flood, fire or another natural disaster. The bottom line is that your estate planning attorney is not responsible for safeguarding your trust: you are.
The children have exhausted all the options: they have searched the parents’ house; they have contacted the attorney. Places such as County Recorder’s Office would never have your living trust, so, calling them was a waste of time. So, what’s next? Sadly, the only way out of this situation is to initiate California probate proceedings.
Where There’s a Will There’s a Way… Right?
You may ask: Why probate?
But my parents had the trust. There are three children and no other heirs. Probate is a long and expensive process. Their parents did set up a trust… isn’t there a way? What is a will is discovered but not a trust? Where there’s a will there’s a way, right? Once again, the way is probate.
While this was a theoretical family, just an example, we see this happen all the time. It doesn’t matter how many children the parents had. If it seems obvious that the heir is going to be the only child, the law is the law. Until we can set up an escrow in heaven and have our departed loved ones sign the listing agreement, a missing trust means probate, just like if there was never a probate to begin with.
If you are wondering why probate is necessary, think about this: Isn’t it possible that the parents wanted to disinherit one of the children in their trust? Perhaps they wanted to leave more money to the daughter who lived in California and who used to help her elderly parents more? Maybe somebody has the parents’ will? Perhaps the parents wanted to leave the house not to their children, but to their grandchildren. Maybe a church. A charity…
The main point of having a trust is providing your living loved ones a blueprint: who gets what and when. Who is in charge (successor trustee). Absent that, the law requires the estate to be probated. During the court hearings, potential heirs will have a chance to speak up. Creditors will get their day in court. There is going to be a fair accounting of the estate’s assets. Finally, the house can be sold with a clean title and grant deed, with a documented transfer of the property from the deceased parents to their children and then to the new buyer.
What can we learn from this?
While a living trust is a private document, it doesn’t have to be a secret. Ask your California estate planning attorney to provide you with both paper and a digital copy of the trust. Email it to your children and maybe a trusted friend too. Make it clear who is the successor trustee. This way, your assets will be distributed in the manner that you intended and your legacy will be preserved.
Certified Probate & Trust Specialist
As a Certified Probate & Trust Specialist you can rest assured that as a Real estate professional, I have the understanding of the Probate transaction and can represent sellers or buyers in probate transactions, as well as investors looking to purchase probate properties.
All Information is deemed reliable but not guaranteed. Information is for educational purposes only.