Question: When I was a single lady, I bought a home. I have now been married for eight years and we are living in my house. Since my husband is helping me with the mortgage, upkeep and taxes, I want to include him in the title as community property. Can I just sign over half of the property to him and then will it be community property? Will there be a gift tax if I give him half my home?
Answer: Converting real estate from your separate property, as it is now, to community property is complicated. Since you two have been living in the property and he has been sharing the expenses, he may already have certain community property rights to the home by virtue of the money he has been putting in. Sometimes married couples create community property interests in separate property inadvertently by doing this very thing.
However, since you state you intend to hold this property as community property with your husband, you need to deliberately “transmute” it into community property. This needs to be done in a certain way so you need to work with an attorney. It should be done properly and, like many laws, there is some complexity to achieving the desired outcome.
As for gift tax, the answer is no. Husbands and wives can give an unlimited amount of property to each other and not pay any gift tax.
Question: We have a professional trustee who is settling my dad’s trust. She said she will be paid a percentage of the value of the assets of the trust. We think she should charge an hourly rate, as attorneys do. Can we tell her that is what we are willing to pay and not the percentage? I don’t think there is much work involved.
Answer: People choose to appoint professional trustees for various reasons. Maybe your father didn’t want to burden you with the work and time involved in the administration of the trust, maybe he has complex assets that need professional handling, or maybe you and your siblings live out of state and would need to travel to administer the trust or, finally, he may have felt you are busy with your own families, careers and lives and would not have the time to properly address the details of administration. For whatever reason, your father selected a professional and, presumably, at the time he selected her, she discussed her fee structure with him. You did not hire her, your father did, and her fees are paid by the trust, not you.
You can certainly ask the trustee if she would be willing to be paid hourly. Most trusts state that a trustee is entitled to “reasonable compensation” for their services. Professional trustee fees are overseen by the state of California and they consider reasonable compensation to be what a bank trust department would charge for similar services. Ask the trustee if her percentage rate is similar to what banks are paid for similar services – it is a fair question. The trustee would most likely be open to discussing her fees, so ask away. As an aside, you say there is not much work but, when done well, a trustee’s work is extremely detailed and the work is not only done well because your dad expected it to be but what she does should result in a smooth transition of assets to you with no unnecessary delays or unfortunate surprises later.
Liza Horvath has more than 30 years of experience in the estate planning and trust fields and is a licensed professional fiduciary. Liza currently serves as president of Monterey Trust Management. This is not intended to be legal or tax advice. If you have a question, call (831)646-5262 or email at [email protected].