SCENARIO: I have a listing and the two sellers are trustees of a trust. One is the mother who had been on title before the property was placed in the trust with her husband who is now deceased. The other is the daughter who is a successor trustee. Neither trustee has lived in the property for many years. Are both exempt from completing a TDS?
RESPONSE: Unfortunately, that is not enough information to answer your question. Some trustees are exempt from completing a TDS and some are not. According to California law, all Trustees are exempt from completing a TDS unless (1) the trust is a revocable trust; AND (2) the trustee is a natural person (meaning a live human, not an institutional trust department, for example); AND (3) the trustee either owned the property in their own name OR occupied the property within one year of the date of the sale.
There are two ways to determine if a trustee is exempt from completing a TDS:
- THE FAST WAY: Simply follow the steps in the “Trustee TDS Exemption Chart”
- THE LONG WAY: The requirements as to whether the Trustee is exempt from completing the TDS, or is not exempt, are determined by whether all three of the following questions can be answered YES. A single NO means that the Trustee is Exempt and does not complete the TDS.
-
- Is this a Revocable Trust? If YES, answer the next question. If the answer is NO (it is an irrevocable trust), stop, because the Trustee is Exempt.
- Is the Trustee a live human being (i.e., not an entity)? If YES, answer the next question. If the answer is NO (the Trustee is an entity), stop – the Trustee is Exempt.
- Has the Trustee EITHER owned the property in his or her own name OR occupied the property within one year of the date of the sale? If the answers to all three questions are YES, the Trustee is NOT EXEMPT and must complete a TDS.
In the above Scenario, assuming that the trust is revocable, the mother must complete a TDS since she was on title previously. The daughter is exempt since she was not on title previously and has not occupied the property within the past year, and she must complete an ESD, or other authorized local disclosure form. (e.g., with the San Francisco contract the SFSD. In PRDS contract the SSD.) If the trust is irrevocable, then both trustees are exempt from completing a TDS. Successor trustees are treated the same as other trustees for disclosure purposes.
For more information on TDS exemptions in general, Tip: “Exemptions from Seller Completing a TDS”
PRACTICE TIPS
- If more than one trustee, each must be evaluated separately using the above approach. Each trustee/seller will then complete the appropriate disclosure form(s) – TDS, SPQ, ESD or authorized local disclosure form.
- Remember that ALL Sellers of ALL properties of ALL kinds must disclose to Buyers ALL conditions and defects known by the Seller affecting value or desirability. Thus, if a trustee is exempt from completing a TDS, that trustee still has the same disclosure obligation regardless of the paper on which the disclosures are made.
This Weekly Practice Tip an attorney client privileged document and is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices