​When the last Trustee has deceased, the designated Successor Trustee is burdened with the disposition of the assets within the Trust and there are specific requirements of the Successor Trustee(s) under the California Probate Code 16061.7

Minimum Required Successor Trustee Tasks: 

• Trustee should get multiple copies of death certificate(s) 
• Trustee must remove the prior Trustee’s name from all assets held in the Trust
  • Affidavit of Change of Trustee for each property which is recorded
  • Removal of Trustee’s name from bank and investment accounts 

 
Minimum Required Successor Trustee Tasks: Probate Code 16061.7 

• Notification under California Probate Code §16061.7 requires a Trustee to send a notice to all beneficiaries of a trust when the trust becomes irrevocable within 60 days of the trust becoming irrevocable (from the Date of Death of the deceased Trustee(s).
• Sent to everyone who would inherit in the absence of the Trust 
• Sent to everyone named in the Trust and all amendments

 
The “16061.7 Notice” must include the following information: 

• Identity of the settlor(s) (aka grantor, trustor or trust maker) of the trust 
• Date the Trust was signed 
• Trustee(s) name, address, and telephone number 
• Address of the physical location where the “principal place of administration of the trust” is located 
• Any additional information that may be expressly required by the terms of the trust instrument 
• Statement recipient is entitled, upon reasonable request to the trustee, to receive from the trustee a true and complete copy of the terms of the trust

 
Minimum Required Successor Trustee Tasks: TIN and Assessor
 

• Trustee should stop using Decedent’s SSN #
  • Trustee can complete Form SS4 and get a TIN # for the Trust 
• If Decedent was a property owner, Trustee must notify County Assessor’s Office within 150 days of death which is a Change In Ownership (CIO)
• Change in Ownership Statement Death of Real Property Owner
  Form (BOE-502-D/ASSR-176)
• Failure to timely file can result in penalties
• The penalty is 10% of the taxes, applicable to the new assessed value or $100, whichever is greater
• If not willful, $5K cap if homeowners’ exemption is claimed, $20K if no homeowners exemption claimed on the subject property

 
Successor Trustee Duties

• Keep the trust property separate from other property 
• Designate property as property of the trust 
• Enforce trust claims & defend actions against the trust 
• Not to delegate to others the performance of acts that the trustee can reasonably be required personally to perform 
• (When 2 or more Trustees) participate in the administration of the trust: keep a co-trustee from breaching the trust 
• Duty to apply the full extent of the trustee’s skills 
• The trustee must act in the best interests of the beneficiaries and must not use their position for personal gain 
• The trustee must file any necessary tax returns and pay any taxes that are due to be paid from the trust or K1 the beneficiaries 
• The trustee must make distributions to the beneficiaries according to the terms of the trust and in a timely manner 
• The trustee is responsible for managing the assets in the trust according to the terms laid out in the trust document 
• The trustee must keep accurate records (in a way that your CPA will think is ludicrous) of the trust assets and transactions and make these records available to the beneficiaries upon request 
• The trustee must provide the beneficiaries with regular accountings of the trust assets and transactions or have such accounting waived
  
  

Record Keeping and Accounting 

• Trustees must account to the beneficiaries 
• An accounting is like a big bank statement. There is a starting balance, receipts, expenses, and an ending balance. 
• All these numbers have to add up correctly…If they don’t the Trustee is 100% personally liable
  
  

Some Record Keeping Tips
 
1.Don’t withdraw cash from the trust checking account!

1. Consider an interest-bearing checking account
2. Consider a separate checkbook register for the account where you record the date, amount, and source of each deposit as well as expenses
3. Balance the checking account monthly
4. Maintain careful records of all transactions

Successor Trustee Requirements For Real Property

• Obtain multiple copies of Death Certificate(s)
• Obtain Trust TIN identification - Complete IRS Form SS4
• Remove prior Trustees names from all assets held in the Trust
  • Title company will record Affidavit of Change of Trustee
  • Include bank and investment accounts name change
• Send Notification to all beneficiaries - due no later than 60 days from date of death
• Notify Assessor’s Office - Change of Ownership Statement - due no later than 150 days from date of death
  • Form BOE-502D/ASSR-176

Realtor tasks:

• Open Presale Escrow
  • Send Death Certificate(s) and Trust to Title company for approval
  • Obtain Preliminary Title Report 
  • Title change amendment recorded by title company

 
WE RECOMMEND CONSULTING WITH LEGAL COUNSEL TO CONFIRM & VERIFY THE ABOVE INFO
 
Subscribe to the Cunningham Legal YouTube Channel
www.YouTube.com/@CunninghamLegal
 
Cunningham Legal - Office Locations
 
Northern California

• Auburn
• Oakland (Montclair Village)
• Sacramento
• San Francisco
• San Rafael
• Walnut Creek

 
Southern California

• Pasadena
• Westlake Village

Pete Sabine & Leslie Whitney
Call or text 925.787.2548
Compass
DRE #00889760

The solar industry is booming. As of 2019, there were more than 2 million residential solar installations in the U.S., and that number is projected to double by 2023. 

One way builders and homeowners are looking to install solar systems is through a lease or power purchase agreement (PPA) (i.e., a “solar agreement”) with a third-party solar provider. But solar agreements are known to create unique challenges when selling a home.

If you own a home with a solar agreement, your Realtor may be able to help you navigate potential complications with the sale.

SOME ISSUES THAT SELLERS MAY EXPERIENCE INCLUDE:

• Buyers shying away from a house because of the solar agreement (due to things like term, payment, maintenance considerations, technology obsolescence and more)
• Buyers who may not meet the solar company’s qualifications
• Potential issues involving the proper transfer of the solar agreement

5 TIPS FOR A SMOOTH CLOSING
START EARLY
Contact the solar contractor company early in the selling process whether the property is tied to a solar agreement. The terms for transferring a solar agreement may impact the marketability of a property, and disclosure to potential buyers is important.
REQUEST A COPY OF THE SOLAR AGREEMENT
Provide a copy of the current solar agreement to your Realtor. If you don’t have a copy, you should request it from the solar company.
SEEK ADVICE
Unfortunately, misconceptions about solar agreements are common. It’s important that buyers and sellers fully understand the terms of their solar agreement, including its transfer rights and requirements at the time of the sale of the home. Many solar companies have dedicated representatives to assist with the lease transfer process, but you may wish to consult with an attorney first.
COVER ALL YOUR BASES
When selling a home subject to a solar agreement, it helps to work with a trusted title company that can alert you to potential title problems that need to be addressed prior to closing.
KEEP LINES OF COMMUNICATION OPEN
Early in the process, provide your Realtor should provide the closing team with as much information as possible about the transaction. What they don’t know could cause delays to the closing process.

Pete Sabine & Leslie Whitney
Call or text 925.787.2548
Compass
​#00889760

Many older adults need some type of senior care, whether it’s a few hours per week of in-home help or full-time nursing home care. Even if you can find a high-quality senior living community in your area, the cost of care is a major concern, especially for seniors living on Social Security or limited pension benefits.
 
Due to high rates of inflation, senior care is getting even more expensive. According to the 2021 Genworth Cost of Care Survey, seniors in the United States pay an average of $4,500 per month for assisted living and $7,908 per month for a semiprivate room in a nursing home.
 
As a result, many seniors are selling their homes to finance the cost of the care they need to maintain their quality of life. The process of selling a home is complex, especially for older adults who need government benefits to cover some of their expenses.
 
In light of this, AssistedLiving.org developed a thorough, easy-to-navigate guide to assist seniors and their families to sell a house to pay for long-term senior care.
 
If you’re getting ready to help a parent sell their home, this guide can help you get organized and make wise decisions about everything from timing the sale to choosing an experienced attorney.
 
This guide addresses crucial topics such as…

• Finding Assisted Living in Your Area
• When Is the Right Time to Sell Your Parent's Home to Pay for Senior Care?
• A Home Seller's Checklist
• Important Documents You Need to Sell a Home
• Taxes, Medicaid Eligibility and Other Financial Implications of Selling a Home to Pay for Long-Term Care
• Special Considerations When Selling the Home of Someone Who Has Dementia
• Managing Difficult Emotions When Selling a Parent's Home
• Other Ways to Finance Long-Term Care
• How to Find a Real Estate Agent and Elder Law Attorney

Click on this link to access this guide.

This guide is a valuable asset to seniors and their families within your community to navigate this important life stage.

Pete Sabine & Leslie Whitney
OurFiveStarTeam.com

​AARP has stated that 77% of individuals over 50 prefer to age in their own homes. Yet, the inevitable challenges of aging, including diminished sensory faculties and mobility restrictions, can complicate their desire to stay in their current residences. As a result, finding a home better suited to their changing needs becomes an urgent concern.
 
In light of this, Caring.com developed a thorough, easy-to-navigate guide to assist seniors in their home-buying journey. This resource addresses crucial topics such as identifying the ideal location, essential home features, professional assistance, home-buying options, and effective financing strategies.
 
Click on this link to access the Guide to Buying at Home to Age-in-Place.
 
This guide is a valuable asset to seniors and their families within your community to navigate this important life stage. 

Caring.com is a leading senior care resource for family caregivers seeking information and support as they care for aging parents, spouses, and other loved ones.
Featured by AARP, The Administration for Community Living, The National Legal Resource Center, and Forbes, as well as referenced by many governmental agencies and organizations across the Internet.

There is a lot of chaos with home buyers finding homeowner insurance options in California now… here is a general outline of what has been provided to insurance agents looking for guidance... 

• Homes with a replacement cost of two million dollars and above are going to be the hardest to place. There are only two carriers actively writing in California (CHUBB AND PURE) and they will require full packages. (Home, auto & umbrella)
  
  
• Homes with a replacement cost of two million dollars and above that are DECLINED by CHUBB/PURE due to location, claims history or lack of updates  will have to be placed with non-admitted carriers such as Lloyd’s of London, Scottsdale, Azguard, Vault etc.
  
  
• Homes with a replacement cost under two million dollars still have more options. We have had success with Safeco, Mercury, Hartford, CIG, American Modern etc.
  
  
• Occupancy status is going to make a huge difference. Carriers are leaving space for primary homes. Secondary homes and investment properties will also likely have to be placed with non-admitted insurance carriers.
  
  
• Homes with lack of updates in hard locations can be placed with the California Fair Plan. California Fair Plan is the insurer of last resort but it IS an option if all other carriers decline.

 
As a proactive measure, we strongly encourage buyers check for insurability before making an offer.

We also encourage seeking insurance coverage indication quotes to include in disclosures on behalf of the sellers. 

Pete Sabine & Leslie Whitney
OurFiveStarTeam.com
​

Let's talk about the ins and outs of pre-qualification, pre-approval, and TBD approval.
They may sound similar, but each one is a different stage in the mortgage approval journey.

Pre-Qualification: Just Testing the Waters
Picture pre-qualification as a friendly chat with a loan officer. You'll share your income, assets, debts, and credit score, and they'll give you a ballpark figure of what you might qualify for. Plus, they'll suggest the kind of loan that suits your needs.
But here's the catch: pre-qualification is based on your word, not on verified documents. It's a great way to gauge your purchasing power, but it's far from a mortgage approval guarantee.

Pre-Approval: Things Are Getting Serious
Pre-approval is a step up in the mortgage approval process. Now we're talking about a deep dive into your financial qualifications, including income, employment history, assets, debts, and credit score. You'll need to supply some paperwork like pay stubs, tax returns, and bank statements to back up your claims.
Once the loan officer verifies everything, you'll get a pre-approval letter stating your mortgage loan eligibility up to a certain amount. It's a solid indication you're on the right track to secure that mortgage.

TBD Approval: The Ace up Your Sleeve
TBD (to be determined) approval is pre-approval's mysterious cousin. It's underwritten without a specific property address but requires the same thorough financial review as a regular pre-approval. When you finally find your dream home, your lender will need an appraisal to confirm the property's value and finalize the loan terms.
Why bother with TBD approval?
​It's perfect for home shoppers who want a head start on the mortgage process or who want to compete with cash buyers by showing sellers they're serious contenders with an underwritten loan approval.

Comparing the loan Pre-Qualification, Pre-Approval, and TBD Approval
What sets these three apart is the level of verification and lender commitment. Pre-qualification is a casual chat based on your word, pre-approval is a deep dive into your finances backed by documentation, and TBD approval is an underwritten loan pre-approval without a property address.

If you're on the hunt for a mortgage, choose a lender who offers the right approval type for your needs. We recommend an underwritten TBD loan approval to successfully prevail in the competitive home buying process.

Need more info on mortgages and financing? Reach out to us via call or text! We're here to guide you through the mortgage approval maze and find the perfect loan for you.

Pete Sabine & Leslie Whitney
Call or text 925.787.2548.
Visit OurFiveStarTeam.com
Compass

 
#mortgage #homebuying #prequalification #preapproval #TBDapproval #mortgagelending #LocalMortgageBroker #homeownership #homefinancing #homebuyingtips #homebuyers #realestate #househunting #homebuyingprocess #realestatetips #homebuyingmadeeasy #homebuying101
DRE #01527235

Depreciation is a method for matching the costs of acquiring property over the properties’ estimated economic life.

The IRS requires that most properties be depreciated via the ‘straight-line’ depreciation method. Using the straight-line method, residential income properties are depreciated over 27.5 years. Commercial properties are depreciated over 39 years.

Depreciation Calculations
It is important to note that land is not depreciable. In order to properly calculate depreciation, the value of land must be excluded.

For example, a $1MM duplex with land worth $300,000 has $700,000 worth of depreciable real estate.
Using the straight-line depreciation method, the annual depreciation amount is approximately $25,500 ($700,000/27.5)

NOTE: The IRS will typically not challenge the assessment of the land value if it reasonable. A tax advisor, attorney or real estate agent should be able to provide guidance for what is reasonable based on the location and type of land.

Depreciation Benefits
Depreciation is an ‘intangible expense’ that will reduce the reportable taxable income from the property.
This is good, because the end result is more money in our pocket and less tax to the IRS. Here’s how it works:

The yearly rental income from the example duplex is $36,000. At the end of the year, this will have to be reported to the IRS. However, the IRS does not tax the entire $36,000. The taxable income from the property is calculated as follows:

Rental Income
 - (Expenses)
 - (Depreciation)
 = Taxable Rental Income

If the expenses of operating and managing the duplex are $5,000 for the year, the taxable rental income is calculated as follows:

$36,000
 - ($5,000)
 - ($25,500)
 = $5,500

NOTE: Please always seek the guidance of a tax advisor. It may be beneficial for some property owners to depreciate certain items on the property (fences, fixtures, etc) at different depreciation schedules, which is allowed via cost segmentation.

Depreciation Tax
Upon the sale of an investment property, the IRS requires the payment of a depreciation recapture tax. 
The tax rate is currently set at 25%. In the example above, if the duplex was owned for 10 years, the entire depreciation taken on the property would amount to $255,000 ($25,500 x 10).

The IRS requires a recapture tax on that entire amount. Hence, the sale of the duplex will result in a $63,750 depreciation recapture tax (255,000 x 25%). This is in addition to state and federal capital gains taxes.

The depreciation recapture tax as well as any associated capital gains taxes can be deferred in full via a 1031 Exchange.

Conclusion
Of all the benefits of owning real estate, depreciation may be one of the most important.
The tax advantage depreciation offers is powerful. The IRS will always assume that depreciation is taken and will hold an investor liable for the depreciation recapture tax – even if the investor failed to take advantage of the depreciation.
​Bottom line: make sure you are taking advantage of this powerful tool.

California REALTORS® applaud the bill to raise capital gains exclusion and free up housing inventory...
 
 The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today issued the following statement in response to the “More Homes on the Market Act,” reintroduced today by House Representatives Jimmy Panetta (D-CA) and Mike Kelly (R-PA). The bipartisan bill increases the capital gain exclusion amounts on the sale of a principal residence to $500,000 for single filers and $1 million for joint filers and indexes the exclusion for inflation. 
 
“California REALTORS® thank Congressman Panetta for reintroducing the ‘More Homes on the Market Act.’ This bill will provide necessary tax relief for California homeowners, particularly senior citizens, who have been unable to move because of the tax burden that could result if they were to sell,” said C.A.R. President Jennifer Branchini, a Bay Area REALTOR®.
 
“For working Californians, a home is their biggest and most important investment. However, because the capital gains exclusion was passed 25 years ago with no indexing for inflation, fewer and fewer families have been able to downsize and access the equity built up in their homes. This has resulted in fewer homes being available for younger and first-time homebuyers to move into, which has driven up demand and home prices even more.” 
 
The National Association of REALTORS® estimates that in California, as many as 95 percent of single homeowners and 68 percent of married homeowners who purchased their homes before 2000 could face capital gains tax if they sold their home this year. 
 ​

Here are the top 10 things to know to optimize your investment real estate portfolio
 
As we start off the New Year, this is a great time to provide a list of things to consider that might help your real estate investments be more profitable and your life less stressful.  

#1 - Set Up a Trust
The main advantages of setting up a Trust is to avoid probate and keep your estate private. What is probate? Probate is a court supervised legal process that includes determining the validity of your will, gathering your assets, paying your debts (and taxes) and distributing the remaining assets to your heirs. Probate is part of the public record and probate fees are set by law (and are not cheap).   Spending a bit of time now setting up a Trust will certainly pay dividends later.  Some people mistakenly think that setting up a trust will help eliminate taxes. It will not (although there are some tax benefits to a Charitable Remainder Trust).

#2 - Adding Family to Title
Don’t add your son/daughter/niece/nephew/etc. to the title of your property unless absolutely necessary. Adding someone to title may be as simple as filing a quit claim deed, but it may have unintended tax consequences. When you add a person to title, the IRS views that as a gift. If a son is now a 50% owner of a $1MM property, he just received a $500K gift. The gift giver (you, the owner) may now be responsible for a gift tax.  A more cost-effective solution may be to simply set up a Trust and name the son as the beneficiary of the Trust. Once you pass away, the son will receive the property (and at a step up in your cost basis – more of which is discussed below).

#3 - Don’t Ever Sell
‘Buy and hold’ can be a good strategy for building wealth and also keeping it. Real estate investors who own property until they die will pass the property to their heirs at a "stepped up cost basis". Under Section 1014(a) of the IRC, an heir’s basis in a property will equal the fair market value of the property at the time the descendant dies, which can effectively eliminate all capital gains and depreciation recapture taxes saving the heirs a capital gain income tax bill.

#4 - Defer, Defer, Die
Conducting a 1031 Exchange will allow for the deferral of capital gains taxes.  Doing another 1031 Exchange will allow for tax deferment again. An investor who cashes out, after doing a series of 1031 Exchanges, will pay taxes on all past transactions. Smart investors, however, take advantage of the step up in basis discussed early and defer, defer and then die. Having never cashed out of real estate all capital gains taxes will be eliminate for the heirs.

#5 - Utilize Equity Lines Strategically
In many instances, accessing an equity line may be a smarter decision for raising cash than selling real estate.  Cash from an equity line is non-taxable whereas the sale of real estate may trigger capital gains taxes. Obviously, the investor needs to be cautious of the extra debt burden on the property, but access to tax free cash via an equity line may be a very smart move.     

#6 - Make Strategic Acquisitions
The next 1031 Exchange replacement property you acquire may have a pool, an ocean view and a large yard where the grandkids can play. Those amenities may be nice for your tenants, but even better for you after you boot the tenants out and move in. Acquiring a future primary residence via a 1031 Exchange is not illegal, but needs to be done with caution. It is possible however and making a strategic acquisition of that sort can be a nice way to purchase your dream home.

#7 - Make Strategic Moves
Moving into a rental property, converting it into a primary residence and then selling it will allow you to reap the benefits of the Homeowner’s exemption. If you are married up to $500K of gain will be tax free. Time of residence and ownership rules may apply, but the strategy has been used effectively by our clients throughout the years.  

#8 - Diversify
Wall Street has been advocating the benefits of diversification for decades. A diversified portfolio allows you to reduce the volatility of your portfolio and either increase return for a given risk or decrease risk for a given return.  Often it isn’t prudent to have all of your eggs in one basket.  With real estate you can diversify either by geography, by asset class or both.  It may be time to start thinking like Wall Street.

#9 - Enjoy Your Investments
Your investments should work for you. If, at some point, they become too burdensome on your life, it may be time to rethink your strategy. This doesn’t necessarily mean cashing in all of your chips (and paying taxes) but it may mean transitioning out of difficult to manage properties and into easier to manage ones.

#10 - Build a Solid Team
Building a solid team is going to pay dividends over the long term. We have over 38 years of real estate expertise and resources for 1031 tax deferred exchange intermediaries. We would love to be part of your team.

If you'd like to discuss a 1031 Exchange please feel free to contact us…

Pete Sabine - call or Text 925.787.2548.
Leslie Whitney – call or text 510.388.5794
Visit OurFiveStarTeam.com
Compass. DRE 300889760; 01950037