Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes
Hello,
My co-worker brother and wife passed away in car accident leaving a baby behind. His brother had a trust which give one of the grandparent custodian to manage there boy assets until age of 18. They are wondering can the grandparent keep paying the previuos home loan by renting the home to pay off the mortgage or he paying the mortage from his work pay check. They dont want to lose the home and sell it. Want to keep home under baby name, what can they do?
Why would they not choose to sell. It seams the easiest and most logical approach.
They can do as they choose to carry the property provided all profits and losses are attributed to the trust.... but keeping it would be a mistake. Sell and put the money in a trust and turn it over to a financial advisor..
Some people do the strangest things.
OP is in CA; if the property is also in CA then the inheritor gets to bank the parents/grandparents property tax basis/bill. If the property was originally purchased by the deceased 40 years ago, that could be $400/mo in bonus cashflow that can only exist if it's kept with the kids/grandkids of the deceased, on top of whatever a standard/vanilla cashflow analysis would reveal. Prop 13 makes dynasty creation tax advantaged in California. It's worth exploring keeping the property in the family IMO.
EDIT: Link for OP; some of this paperwork has a time limit so your friend needs to jump on this first and foremost, now that I think about it.
Why would they not choose to sell. It seams the easiest and most logical approach.
They can do as they choose to carry the property provided all profits and losses are attributed to the trust.... but keeping it would be a mistake. Sell and put the money in a trust and turn it over to a financial advisor..
My co-worker brother and wife passed away in car accident leaving a baby behind. His brother had a trust which give one of the grandparent custodian to manage there boy assets until age of 18. They are wondering can the grandparent keep paying the previuos home loan by renting the home to pay off the mortgage or he paying the mortage from his work pay check. They dont want to lose the home and sell it. Want to keep home under baby name, what can they do?
Short term if your friend just starts picking up writing the check where the deceased left off, the lender is going to cash the check, not ask any questions, and not make a big fuss.
Medium/long term, this can be problematic. There was a story a while back about a woman in Berkeley who lost her inherited house because due to her not being the "borrower" on the note, she couldn't get anyone at the bank to seriously speak with her about something to set things right. Since that description is all the detail I can remember, my google-fu is failing me at present in terms of finding the article. EDIT: Ahahaha, all I had to do was add trusty old "Wells Fargo" to the search string and I found it. Always trust WF to be part of a good scandal!
My suggestion would be to get the revocable living trust in front of an underwriter, see if it ticks the boxes for your friend to refinance it in their name once a tenant is in place. Get landlord's homeowner's insurance set up too. And get a good estate planner and tax professional - in addition to the above, we've done refinances using rental income as reported on a trust's tax returns.
Why would they not choose to sell. It seams the easiest and most logical approach.
They can do as they choose to carry the property provided all profits and losses are attributed to the trust.... but keeping it would be a mistake. Sell and put the money in a trust and turn it over to a financial advisor..
Some people do the strangest things.
OP is in CA; if the property is also in CA then the inheritor gets to bank the parents/grandparents property tax basis/bill. If the property was originally purchased by the deceased 40 years ago, that could be $400/mo in bonus cashflow that can only exist if it's kept with the kids/grandkids of the deceased, on top of whatever a standard/vanilla cashflow analysis would reveal. Prop 13 makes dynasty creation tax advantaged in California. It's worth exploring keeping the property in the family IMO.
EDIT: Link for OP; some of this paperwork has a time limit so your friend needs to jump on this first and foremost, now that I think about it.
What they want is to keep the house under they kid name, meanwhile the grandparent rents the home until the kid turns 18 and they can decide to sell the home and keep renting the home. Can the grandparent inherent the home to the kid name which puts deed under kid name and manage the renter home for him and pay the mortgage with the rent, or should he manage the home as rental under trust and keep paying the mortgage like that?
Or can the grandparent refinance the home under the kids name and his name. What's the best solution to keep the home under kid name and rent it out until he turns 18?
Having been thru dealing with real estate in a trust, i respectfully suggest they speak with a trust attorney... There are good ones that wont charge zillions of $$$.. But this seems important enough to get it right.
Suggest to your friend to call various smaller trust attorneys and describe the situation and ask how much it might cost to get the paperwork in order.
Agree that they should keep the house, and rent it out it being CA and all.....
and I am really very sorry for the loss of your co workers brother :(