Vacant Family House Dilemma (2 of 2)

Now That I Am Managing My Mom’s Assets as Trustee of Her Trust in California, What Do I Do About Her Now Vacant Family House? (Part 2 of 2)

This vacant family house issue often arises in California in many different contexts including:

1. When acting as trustee of someone’s trust;
2. When acting as conservator regarding the conservatorship court proceeding of someone who cannot take care of herself anymore; and
3. When acting as the administrator or executor of the probate decedent’s estate court proceeding of someone who is deceased.

This is the second post of a 2-part post series. In the first post we provided you with rules and information. In this second post we demonstrate how those rules apply to a set of real-world facts.
How Does the Family House End Up Vacant in the First Place?

How Does the Family House End Up Vacant in the First Place?

Here’s how it often arises:

1. Mom and Dad bought a house and lived in it for 50 years. They had 3 children, and they raised all 3 children in the house.
2. The value of the house increased greatly in those 50 years. The fair market rental value of the house now is $3000.00 per month.
3. Mom and Dad created a trust naming their son Rusty trustee to be in charge of carrying out the trust after Mom and Dad cannot do it anymore. The trust provides for all assets to go equally to their 3 children, Rusty, Tina, and Scooter, after Mom and Dad both are deceased.
4. Then Dad died. Shortly after Dad died, Mom suffered a stroke. Mom had to move out of the family house and into a skilled nursing facility. She will not be returning to live in the family house. Rusty had to take over as trustee of the trust to manage all trust assets for Mom.
5. Rusty trustee has his hands full raising his kids and managing Mom’s finances. He leaves all of Mom’s furnishings in the house and leaves the house vacant for 36 months.
6. Rusty’s sister Tina has become exasperated because she needs to chip in with Rusty to pay for Mom’s expenses. She is also paying college tuition for 2 of her children, and she’s low on cash. Tina is especially bothered because she feels that the family house shouldn’t be sitting dormant under these circumstances. She’s had many conversations with Rusty about this. Rusty always tells Tina that he’s too busy to deal with it.
7. After a few months, Tina can’t take it anymore. She files a petition with the court to have Rusty removed as trustee and surcharged. (Surcharge means paying from your personal funds to correct a mistake that you made that had negative financial consequences.)

Can I Get into Trouble as Trustee if I Allow My Mom’s House to Remain Vacant?

Rusty trustee could find himself in trouble in these facts. He could be violating his duties to preserve property of the trust estate and to make that property productive. A court could order him to pay $108,000.00 of his personal funds into the trust as a surcharge to replace the lost rent. That’s $3000.00 per month times 36 months.

Most likely the surcharge would not be for that maximum amount. It would be reasonable for Rusty to wait a few months after Mom went to the skilled nursing facility before Rusty determines whether to keep the house available for Mom or to rent it or sell it and invest the net sale proceeds. It may be reasonable to wait and make sure that Mom will not return to living in the family house. Then it would take time to clean out the house and rent it or sell it.

What if the People Who Lived in the Family House Now are Deceased?

Rusty trustee essentially still has the same problem if Dad and Mom had both died at the same time and Rusty allowed the family house to remain vacant and unrented for 36 months.

Remember that in that situation the trust provides for all assets to go to Rusty, Tina, and Scooter equally.

Rusty trustee could be liable to each of Tina and Scooter in the amount of $36,000. The fair market rental value of the family house is $3000.00 per month. Thus, each month that Rusty does not receive any rent for the family house is essentially the same as him taking $1000.00 from the pocket of each of Tina and Scooter.

What if a Family Member Has Always Lived in the Family House and Still Lives in It?

You may have noticed that only Rusty and Tina chipped in to pay many of Mom’s expenses. Were you wondering about Scooter?

Scooter didn’t chip in because he never has any money. In fact, he’s 50 years old, and he’s always lived in the family house with his parents rent free.

Rusty trustee is taking a risk if he allows Scooter to continue living in the family house rent free, especially after the death of Mom. Rusty could be violating his duty to treat all trust beneficiaries impartially.

Rusty may need to evict Scooter from the family home. That is the difficult reality in some of these cases.

If Scooter lived rent-free in the family house after the death of both Dad and Mom, then Rusty trustee may be able to offset the amount that Scooter inherits from the trust by the reasonable value to Scooter of him living rent-free in the family house since that time.

Get Help from an Experienced Trusts and Estates Attorney to Deal with a Vacant Family House

The vacant house dilemma is only 1 of many things that can get the trustee of a trust, the conservator of a conservatorship court proceeding, and the administrator or executor of a probate decedent’s estate court proceeding into trouble. Don’t risk personal liability by making this type of mistake.

Hiring an attorney experienced with trusts, conservatorship court proceedings, and probate decedent’s estate court proceedings can keep you out of trouble.

At Meinzer Law Firm, P.C., we have over 20 years of experience helping clients achieve their goals in trust cases, conservatorship court proceedings, and probate decedent’s estate court proceedings. Contact Meinzer Law Firm, P.C., in Torrance to assist you if you are a trustee dealing with a vacant family house or other issues.