Good morning! Many people consider their home to be one of most valuable assets, even their 'nest egg' for retirement years. This is Gary Edelbrock, and I'm talking with Nancy and Brian Biggs, who have provided us with some very important guidelines about how to manage that asset.

Take Care When Deeding Into a Trust

A revocable trust is a wonderful instrument to avoid probate. By creating a trust, homeowners can transfer a property to a successor trustee at the time of death without having to go through the court system. The successor trustee merely records a death certificate and the property is transferred. However, we have seen several instances where good intentions almost ended in disaster. It is very common for a homeowner to draft a Quit Claim Deed to transfer the property into the trust. If the deed is not written correctly, the transfer may be partial or invalid, and then the successor trustee may be thrown into probate to resolve the mistake. We strongly recommend that homeowners use a title company to draft and record any transfer deed. We will use two case studies to illustrate the danger of performing your own title work.

A Listing Saved

As with all of our clients, when we take a listing, we thoroughly investigate the property to make sure that there are no issues that will cause havoc when we go under contract. We look at the deeds, the legal descriptions, the tax records, the permits, the well record if there is a well, and the septic permit if there is a septic. We also look for possible encroachments, or anything else that might be of concern.

When we took this particular listing, we noticed that the seller had traded a piece of his lot with the neighbor in order to make the parcel a rectangle. The previous lot line followed a diagonal drainage channel. This trade was fine and legal and correctly recorded. However, several years later, the seller created a new deed to place his property into his trust. The problem in this case, is that the seller deeded the original lot number into the trust. However, the seller no longer owned the original lot. He owned a portion of the original lot and a portion of the neighbor's lot. So, his deed into the trust was invalid. We pointed this out and thankfully, he had the original deed. We were able to describe this situation to the title company and they were able to correct the deed and re-record it prior to recording the sale to the new buyer.

A Purchase Saved

We had an interesting transaction last year. Our clients were looking for a second home. We found an estate property that was a really good deal. The property was held in a trust. The owner had passed away, and his children (the successor trustees) were selling the property.

During our property research, we noticed that there were some new corner pins on the property. We found a recorded survey and asked around to find out why this was done. As it turns out, the owner wanted to build a handicapped bathroom in the back of the home. Unfortunately, the original property line did not accommodate the required setback distance to meet the zoning code for the addition. The owner met with his neighbor and they agreed to swivel the property line to create the additional setback needed. They had a survey done and one triangle went to the neighbor and one triangle went to the owner. All was well and good until the owner placed his property in a trust.

The owner wrote a quit claim deed and deeded his original lot number into the trust. However, this was in error since he no longer owned the original lot. He owned a portion of the original lot and a portion of his neighbor's lot. Unfortunately, the owner passed away. And part of the property was held in the trust and part of the property was personally owned. The personally owned portion would therefore be subject to testate laws that could tie up the property in legal limbo for months.

We drafted an extremely detailed letter describing all of this and noting that the owner obviously intended to put both parcels into the trust. Fortunately, everything was OK'd through the title department and the escrow officer was able to re-record the deed into the trust and then record a deed of sale to our clients.

Nancy and Brian Biggs, Associate Brokers
Prudential Northern Arizona Real Estate
1177 Old Chisholm Trail
Dewey, AZ 86327
Nancy's Cell: 928-273-7113
Brian's Cell: 928-273-7112
www.BiggsRealtors.com
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