Introduction: My Dad
recently died and Iím in charge of tying up the loose ends.
My CPA told me that all I need to do is record a document
with the county recorder to change title to myself and my
brother and all is well. He said that since the death tax
exemption is now over $5 million and my Dad had a Living
Trust I donít really need to do much more. Certainly, he
said, I donít need an attorney.
What are your thoughts?
Want to Do Right Daughter
Dear Want to Do:
This type of advice has been going on since I started out as
an attorney in the mid-70's. But I have noticed it more in
the last year or so.
Basic Rule: My basic rule is
that you donít get your medical advice from the notary
public, you donít get your tax advice from the mortgage
broker, and you certainly donít get your legal advice from
the janitor (or the CPA or financial advisor for that
In other words, you obtain your advice from the proper
expert. The problem is that the consumer often does not know
who the proper expert is and too many professionals,
probably just trying to be helpful, donít appreciate the
limits of their own expertise.
Conundrum: A number of years ago my daughter was about
to purchase a house. She is a very bright and industrious
young lady. She had a real estate tax question. It was
something to which I knew the answer (yes, much tax
information is within the expertise of estate planning and
elder law attorneys). When I gave her the answer she
objected saying that her mortgage broker had told her
differently. I asked her where one should obtain tax advice.
We went round and round about that for a few minutes until
she realized that should be an attorney active in the field
of the tax question or a tax accountant (i.e. CPA or EA). A
Advice Is Necessary: I have had clients tell me the same
thing that your CPA told you. And, of course, because no one
wants to spend money if it is not necessary, these clients,
many of them also bright and intelligent people, want to
believe what they have been told. But when we sit down and
analyze the case, it becomes obvious that legal advice is
For example, in your case, are you or your brother going to
want to end up with 100% of the house? If so, with what will
the other sibling walk away. Letís assume that the house is
worth $500,000 and there is $250,000 in the bank and that is
it; $750,000 total so you each should get $375,000
(750,000/2). If you take the house then you are getting
$125,000 too much (500,000-375,000) and he is being shorted
County Property Tax:
Presumably the one who retains the house will wish to retain
the low county property tax that your Dad enjoyed. If he
purchased the house in the 1980's for maybe $150,000 and the
annual property tax is 1% then he was paying $1500 (we are
going to ignore the annual property tax inflation adjustment
for this example). If the house is now worth $500,000 the
property tax will be $5000 per year. Thatís a $3500
difference every year you keep the house. Ten years; thatís
$35,000: a bunch of money. There are ways to keep that low
property tax but believing your CPA and failing to retain an
attorney is not going to get that job done.
Liability: And were you aware
that as the person in charge (i.e. successor trustee), you
have responsibility to your brother, the IRS, the State
income tax people, the county property tax, and creditors.
(By the way, everyone has creditors whether it only be AT&T
or SDG&E. And that is true even if all bills are current,
i.e. the person still owes the current bill.) Another word
for responsibility is liability. One would think that you
would desire that that liability be brought to a close.
There are legal processes and procedures to accomplish this
task, but ignoring the attorney is not going to get that
Conclusion: There could be a
myriad of other issues that require an attorney. After all,
someoneís death is a cataclysmic event, not only
emotionally, but from a legal perspective, from a tax
perspective, from a title perspective, and from a financial
perspective. All of these loose ends need to be tied up. And
you wonít know what all those loose ends may be until and
unless you sit down with an attorney qualified in this
field. Maybe youíll find out that the CPA was right, there
is very little to do; but maybe youíll find out that there
are tons of things that need to be addressed. Bottom line:
donít get your legal advice from the CPA.