The week after a death, the successor trustee’s first job is not distributing anything. It is figuring out what there was. For a family whose parent owned one house and two bank accounts, that takes an afternoon. For the family of an active real estate investor, it can take months, and sometimes it takes a private investigator.
The client who did not know what he owned
Jason Gaudy, an estate planning attorney at Gaudy Law in Upland, California, described a case he was in the middle of at the time of the interview. Four months in, he still did not have the client’s asset list.
The client is alive. This is planning work, not probate. He had bought and sold so many properties over the years that he had simply lost track of which ones he still held. Gaudy’s office ended up having their investigator run a property search to establish what the man owned.
Read that again. A living, competent property owner needed someone to research public records on his behalf to tell him what was his.
What Gaudy wants investors to do this quarter
Asked what one thing a real estate investor in their sixties or seventies with no meaningful plan should do this quarter, Gaudy gave two answers rather than one.
The first is the living trust. In his experience a great many people in that group have not done one, for the ordinary reason that they do not want to think about it.
The second is the list. He wants clients to have an actual written list of all their properties.
He bundles a few things with the trust itself. Powers of attorney and advance directives, which name someone to act on your behalf if you become incapacitated, belong in the package. Without them, he says, the family is looking at a conservatorship, a court proceeding to appoint someone to manage an incapacitated person’s affairs. And if your attorney or CPA is telling you to form LLCs to hold rental property, do it. Forming an LLC is not game-changing in legal fees, he says, but it can be game-changing if there is a slip and fall on one of your properties, because a correctly set up entity can isolate that liability to the property involved.
Who else should have a copy of the list
This is the part that separates Gaudy’s version from the shoebox-in-the-closet version. The list is not only for your heirs.
He asks clients to keep it updated in three places: with his office, with their CPA, and with their financial advisor.
The third one is the one he flags. In his experience, a lot of people’s financial advisors are not privy to all the assets their clients hold. The advisor sees the accounts they manage. The rentals, the notes, the partnership interests, and the property in another state sit outside their view entirely. Gaudy’s argument is basically: why not let them know what you are doing. That coordination question is the subject of why an estate plan works better with a team.
Why an investor’s list drifts faster than anyone else’s
A homeowner’s asset picture barely moves in a decade. An investor’s moves constantly, and each move is a chance for the record to fall out of date.
Refinances are the classic one. Gaudy sees properties transferred out of the trust during a refi and never put back, which surfaces only after a death and takes a court petition to fix. Entities are another: LLCs formed and then left empty, with no assets ever transferred in. Holding real estate across state lines adds a third layer, often a California trust sitting over LLCs in several jurisdictions.
Gaudy’s countermeasure is a yearly letter or email asking clients whether anything on a short list has happened: a marriage, a birth, a death, a divorce, a purchase or sale of property. Any of those can change what the plan and the list should say.
A list nobody can find is not a list
The inventory and the documents are the same project. Gaudy’s other recurring frustration is families who cannot locate the trust or the deed at all, which is what sends them to probate court. Keeping estate documents somewhere your heirs can find them, in digital form and known to your kids, is the companion habit to keeping the list current. One without the other only gets a family halfway.
What this means if you’re planning a 1031 exchange
An exchange is precisely the event that makes an asset list stale. One property leaves, one or more arrive, there is a new deed, sometimes a new entity, and a qualified intermediary in the middle holding proceeds for a stretch of weeks. If the list is not updated at the closing table, in practice it usually never gets updated. Replacement interests are the easiest of all to lose track of, since a fractional interest in a DST is a beneficial ownership interest rather than a deed your county recorder will hand your children a copy of. Whatever you exchange into, the exchange documents and the new ownership record belong on the list and in the file the same week you close.
Watch: Make a List of Everything You Own: Your Family Will Thank You 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.