How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Barbara Your Own Question
Barbara, Enrolled Agent
Category: CA Real Estate
Satisfied Customers: 3596
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
Type Your CA Real Estate Question Here...
Barbara is online now
A new question is answered every 9 seconds

This is a California real estate question: The Facts: (1) In

Customer Question

This is a California real estate question:
The Facts:
(1) In 2002 I purchased a commercial property in Los Angeles with 3 other investors as Tenant in common. We each hold a 25% ownership interest.
(2) In 2003 I formed a Texas limited liability partnership with myself as 99.5% limited partner, and a Texas corporation as a 0.5% general partner. I am the sole shareholder of the general partner.
(3) In 2003 I formed a revocable grantor trust with myself as the sole beneficiary and the Deed appointing the limited partnership as the sole Trustee;
(4) Next a Grant Deed was recorded to Deed my 25% interest in the commercial property to the limited partnership. The idea was for the limited partnership to hold legal title to the property to the property, while I continued to receive the rental income, deduct expenses (interest and depreciation) and pay tax on the net income. However, the Grant Deed did not specify the Grantee's capacity as the Trustee of the Trust. If I was to change the ownership now it might trigger a County Assessor reassessment which would affect the amount of the other three owner's property taxes.
Does the fact that the Deed did not specify the partnerships capacity as Trustee create a legal problem, and if so what is that legal problem and how can it be fixed? Or can the title be left just as it is without any adverse consequences?
Submitted: 1 year ago.
Category: CA Real Estate
Expert:  Maverick replied 1 year ago.

Welcome to Just Answer! My name is Maverick. (Here) is my profile. Please give me a few minutes to review, analyze and/or research your inquiry and I will be back. Thank you for your patience.

Expert:  Maverick replied 1 year ago.

It seems to me that what should have happened here is that the grant deed should have been from you to the trust; not the trustee. As it stands now the trustee / limited partnership owns the property out right and not in the capacity of a trustee. You can simply have the trustee sign a quit claim deed to the trust now and that should take care of the problem. As far as any tax consequences, you may need to send that in as a separate inquiry to out tax specialist.

Note: Most follow-up questions are answered with in the hour; however, if I am not signed on, please allow up to 24 hours. If we are done, please assign a feedback rating so Just Answer will compensate me. Thank you.

Customer: replied 1 year ago.
Dear Maverick:
A trust is not a separate legal entity that can hold property, but rather a “fiduciary relationship with respect to property.” (Ziegler v. Nickel, 64 Cal. App. 4th 545, 548 (1998).) The California Court of Appeals has stated that “legal title to property owned by a trust is held by the trustee.” (Galdjie v. Darwish, 113 Cal. App. 4th 1331, 1343-1344.) Because the trustee holds legal title to the property, that property must be held in the trustee’s name.
Therefore, the my original question remains unanswered. Having transferred the property into the Trustees name without stipulating the Grantee's capacity as Trustee, how can the Deed be fixed. The three questions original posed were:Questions:
(1) Does the fact that the Grant Deed fails to state the limited partnership’s capacity as Trustee cause a legal problem, and if so what is the easiest way to fix the problem?
(2) What are the consequences of me continuing to hold legal ownership in the name of the partnership as it is presently, and the income going directly to myself as the sole beneficiary?
(3) Is there any easy way to rectify the problem without causing a County Assessor Re Assessment and an increase in property taxes for the other 3 owners and the Lessee?
Expert:  Maverick replied 1 year ago.

Thank you for educating me on this. With these concepts in mind, let's see if I can address at least your first question:

1) Yes, the failure to properly title can cause legal problems as explained by this article. The easiest way to fix the problem is for the trustee to quit claim the deed from itself to itself again but this time the trustee is to sign the deed as “***** *****, Trustee for the Moe and Larry Trust, dated December 1, 2011.”

2) The consequences of continuing to hold title in the name of trustee directly without showing that title is being held by a trustee for a trust are generally described in the article identified above. There may be other consequences that affect this 99.5% set up, however, I do not know enough about these structures to be able to assist you.

3) I do not know about the tax consequences either.

I will opt out and let another expert try to assist you further with this. Your deposit is still in tact and you need not do anything further on your end.

Expert:  Barbara replied 1 year ago.

Different expert here - my name is ***** ***** please allow me to provide you with additional information.

As previously mentioned, failing to properly title property can cause legal problems, especially in your situation.

Correcting mistakes on a previously filed deed can be corrected by a Scrivener's Affidavit or Corrective Deed. A Scrivener's Affidavit would not be appropriate in this instance. You will want to file a Corrective Deed naming the correct grantee so the Corrective Deed becomes part of the chain of title.

The Corrective Deed should also clearly state the reason and reference the previously recorded Deed. There is no Statute of Limitations to file a Corrective Deed in CA.

The closing agent, title company, or attorney who prepared the incorrect deed can assist you with the Corrective Deed.

A reassessment for property taxes should not be triggered by the filing of the Corrective Deed.

The following links contain information you will find helpful:

Please let me know if I can assist you further.

Thank you and best regards,