A married couple set up a trust years ago and put the rental properties in it. Then the husband dies. The wife, who has never been the one handling the paperwork, wants to know what she’s now required to do. Jason Gaudy, an estate planning and probate attorney at Gaudy Law in Upland, California, gives an answer that relieves most people: if the trust was done properly, typically nothing.
One jurisdictional note up front. Gaudy practices in California, a community property state, and the mechanics he describes reflect California practice, including the recording step for real estate and the way AB splits are used. Marital property rules differ meaningfully in other states.
Why the answer is usually “nothing”
Gaudy reads trusts constantly, and he describes what a well-drafted one is really made of: a sequence of scenarios. Here’s what happens right now while we’re both alive. “Here’s what happens when the first one of us dies.” Here’s what happens when the second one dies. And in between, here’s what happens if one of us becomes incapacitated.
Most trusts for married couples, he says, are designed so that after the first death the trust simply stays where it is. The surviving spouse keeps living in the house, keeps collecting the rents, keeps managing the portfolio. There is no court involvement, no retitling scramble, and no probate, which is the entire point of having built the thing.
His practical recommendation is still to check. When a spouse dies and there’s a trust, he suggests calling the estate planning attorney and asking what needs to be done. Most attorneys, in his description, will meet with the survivor, answer the questions, make a change if one is actually needed, and send them on their way. Hopefully, he says, they keep it simple.
The one step real estate does require
There is usually a filing. Gaudy notes that an affidavit of death may need to be recorded against the real property. That document puts on record that one of the owners has died, so the chain of title reflects reality.
He adds a wrinkle that matters to investors: if the property is held inside an LLC rather than deeded directly, you don’t have to do that. The LLC still owns the building; only the membership interest changed hands inside the trust. That’s one of the quiet advantages of the structure Gaudy recommends for rental property, where LLCs hold the properties and the trust holds the LLCs.
The remarriage question, honestly answered
This is the fear people bring to the meeting: the surviving spouse remarries, and the money ends up somewhere other than with the children. Gaudy has a running joke about it involving the tennis pro.
Then he deflates it. In his experience it doesn’t happen very often, because “people don’t disinherit their own kids.” He goes further: when someone comes into his office asking to disinherit a child, his firm won’t be part of it, because in his read that request is usually being driven by someone else, often another sibling.
So for a first marriage with shared children and no unusual facts, his answer stands: typically nothing happens, and typically nothing needs to.
What an AB trust does, and where it goes wrong
Where the facts aren’t simple, the drafting isn’t either. Some trusts require a split after the first spouse dies, and Gaudy names the structure most people have heard of: an AB trust.
The concept, in his simplified version, is to preserve roughly half of the estate for the deceased spouse’s side. He is explicit that it’s more complicated than that in practice. The purpose is protective: if the surviving spouse later remarries, the children from the first marriage still have their share locked in.
The failure mode is that it requires someone to actually do it. Gaudy says his office has litigated these. He has a case running now where the first spouse died and the second spouse simply won’t perform the split. He represents the children, and the argument he’s making is essentially that the survivor signed a contract through that trust and made a promise. That is a lawsuit, years after a funeral, inside one family.
Two lessons come out of that. Documents don’t self-execute. Somebody has to administer them, which is why choosing the right trustee matters as much as the drafting. And blended families need the structure designed for the family they actually have; see dividing property between heirs without the fight.
What this means if you’re planning a 1031 exchange
The death of the first spouse is very often the moment the “tired landlord” question finally gets asked out loud. One person managed the buildings; the other inherits the job. A surviving spouse in their seventies who never handled tenants, repairs, or leases is suddenly deciding whether to keep an active portfolio, and that decision now has to run through the trust document and the successor trustee provisions rather than around them. Owners in that position often start with what a Delaware Statutory Trust is as a passive alternative, but Gaudy’s advice applies first: call the estate planning attorney and find out what the trust already says before anything gets listed.
Watch: What Happens to the Trust When the First Spouse Passes with Jason Gaudy, Gaudy Law
Educational only. Not legal, tax, or investment advice. Jason Gaudy is licensed in California; rules vary by state. Consult your own advisors.