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The TRUST Issue Part II

March 14, 2023


Marina Watts: What are some of the Trust issues you commonly encounter? 

Emily Buchbiinder: Clients come in who had their trusts prepared before 2011, when the estate tax laws changed dramatically. The type of trust they have is outdated and unnecessarily complicated for the surviving spouse to administer. Another issue that often comes up is when clients forget to retitle assets in the name of the trust. Depending on the value of those assets (currently $184,500), if they die, a court proceeding will be required to collect those assets. Another common issue is “who will manage my assets if I become unable to manage my own financial affairs during life and who will distribute my assets to the beneficiaries after death?” Many clients do not have someone in their lives who can handle this responsibility.


Marina Watts:  I understand you specialize in tax issues; can you share what some of the more common tax issues are? 

Emily Buchbinder: I help people understand the new property tax rules since the passage of Proposition 19. As you know, Proposition 19 drastically curtailed the ability of parents to transfer real estate to their children without reassessment. We often discuss whether transferring real estate to an LLC is a good option. I also advise clients about minimizing capital gains tax during life and at death, as well as how charitable giving can reduce income taxes during life and estate tax on death.


Marina Watts: What other areas do you specialize in? 

Emily Buchbinder: I feel that my expertise is in helping clients articulate their goals and concerns. That allows me to discuss different tools that we can incorporate into their trusts, to achieve their desired outcome. For example, I have clients with blended marriages who want to make sure that if something happens to them first, their children will receive an inheritance when their surviving spouse dies. Other clients share the same children, but fear that if thier spouse survives them, that spouse will remarry and leave all the assets to the new spouse. Other clients want to make sure that a child’s spouse (son-in-law or daughter-in-law) does not have access to assets that they leave to their child. 


Marina Watts: Do you recommend use of a fiduciary, and if so, why? 

Emily Buchbinder: I do sometimes recommend that a client use a fiduciary to serve as the successor trustee. If the children do not get along, or one child is litigious, it can take the emotional component out of the administration of the trust, resulting in less fighting. Other times, clients have no one to appoint to serve as a successor trustee, and appointing a licensed fiduciary is a good option.


Marina Watts: Do you litigate as part of your Trust work? 

Emily Buchbinder: NO! NEVER! I am a lover, not a fighter.


Marina Watts: How often do families who inherit a home end up in probate court? 

Emily Buchbinder: It is hard to say how often this happens, but it does happen regularly.


Marina Watts: How could this be avoided?

Emily Buchbinder: In general, the only way to avoid probate in California is to have a trust.


Marina Watts: My clients often ask me if their home falls under Prop 13, after they die, can their children still benefit from Prop 13? 

Emily Buchbinder: Many people think that Proposition 19 eliminated Proposition 13.  That is not the case.  Proposition 19 revised the laws established under Proposition 58.  Proposition 13 states that your property taxes cannot increase by more than two percent each year.  This law still applies to everyone who owns real estate in California.  Proposition 19 allows a child to assume the tax basis of a parent if the home was the parent’s principal residence on transfer and the child makes that home his/her principal residence within one year.  Even if these requirements are met, part of the property may be reassessed.  For example, assume the assessed value of the home on transfer (the value that appears on the property tax bill) is $500,000.  The child would need to have the home appraised as of the date of the transfer.  If the appraised value (sometimes called the fair market value) is $1,500,000 (the assessed value plus $1,000,000) or less, then there is no change in the property taxes.  If the fair market value is $1,600,000, then the property would be reassessed.  However only the amount in excess of $1,500,000 under this example would be reassessed.  So, in this example, the property taxes will increase by a little over $1,000 per year..


Marina Watts: What do you see missing from Trusts that should be included? 

Emily Buchbinder: If there is real estate in the trust and one or more children may want to receive that real estate as part of their share, there should be a method laid out in the trust as to how this will occur. There should always be an updated no-contest clause so that a beneficiary who contests how the assets will be distributed without cause will not receive an inheritance. There are other more technical sections that should be included, but I want the readers to stay awake and read on!


Marina Watts: Are there any new tax laws that people should be aware of when creating a Trust today? 

Emily Buchbinder: Decedents dying in 2023 can leave up to $12.92 million in assets to their children and friends without estate tax. Some people think that this means they do NOT need a trust. Nothing could be further from the truth. Having a trust avoids probate, facilitates the management of assets during life if you become incapacitated, and provides for a smooth transfer of assets to the beneficiaries at a reasonable cost.


Marina Watts: Do you see any issues with a home that has a reverse mortgage being in a Trust? 

Emily Buchbinder: The house can remain in Trust with a reverse mortgage.


Marina Watts: What happens when there is a reverse mortgage on a home in a Trust and the borrower(s) pass away?

Emily Buchbinder: The reverse mortgage loan balance must be paid off by either the heirs refinancing the loan or selling the house. Any funds remaining after the reverse mortgage is paid off goes to the Trust or heirs.


Law Offices Of Emily Buchbinder

525 Capitola Ave

Capitola, CA 95010


Emily Buchbinder can be reached at

(831) 462-1313 or

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Marina Watts
This is the reverse mortgage blog of Marina Watts, a reverse mortgage specialist licensed in California and based in Santa Cruz, California. Marina Watts, NMLS # 1458297
About my blog
This is the reverse mortgage blog of Marina Watts, a reverse mortgage specialist licensed in California and based in Santa Cruz, California. Marina Watts, NMLS # 1458297