Welcome to episode 15 of The Gordian Knot. I’m Rick Harmon. I’m your host. Today, I want to talk a little bit about a crazy situation that happened to us several years ago, and really racked my brain quite a bit, which is saying a lot. This one involves eight properties, 11 units, properties all going to tax sale, all in one trust, and still no trustee was available.
I got a phone call from a real estate professional, an agent, late one morning, on a Tuesday, telling me that she had discovered a number of anomalies of properties that were all on the defaulted tax sale list of properties going to tax sale in San Diego County. Now, this particular agent’s actually one of the smarter agents that I know out there, and she combs through various lists. This particular list, she was at the county tax assessor’s office, and poring through the various lists of properties that are going to be going and scheduled for tax sale, property tax sale, for delinquent, now defaulted, property taxes.
What was really odd about this anomaly, though, was all these properties seemed to be in the name of one trust. But the taxes, that is the tax bills, were going to an address in Arizona. Yet, the person who lived in Arizona was no longer there, because the tax bills were being returned as undeliverable. How does she know this? Well, she did some research. The problem gets crazier as it develops out that these properties were worth several million dollars, probably over $3 million, in several areas, and they’re the Encinitas, California area, and Carmel Valley or Cardiff-by-the-Sea, rather.
What was interesting to me is how these crescendos of problems could come up. Here’s what our research discovered. We found that the original owner of the property was an octogenarian. Octogenarian leaves property in a trust, and a little bit of digging around, we discovered the octogenarian left a daughter, actually left several daughters, as we would come to find out.
Here is where the facts get a little bit murky, and then they begin to get clearer. We discovered that this octogenarian actually had two different families, if you will two different lifetimes. You know, one many years before, had a daughter who was now an adult, and actually retired, a retired schoolteacher, living in Hawaii. What we were able to determine was that this daughter was in fact aware that the property was in a trust, and even sent us a copy of the trust. However, she had absolutely no interest in becoming trustee. So we looked at the trust, and discovered that the successor trustee was supposed to be this octogenarian’s daughter, or rather, his surviving spouse.
But as we learned, the surviving spouse had in fact predeceased him, and she was some decades younger. But she produced, for the time being, another puzzle that we had to unravel, the puzzle being where is the alternate successor trustee? That turned out to be Wells Fargo Bank. Wells Fargo Bank wanted nothing to do with this trust. They were not aware of it, and now the question’s going to be, as we look into this trust, that there was a sole beneficiary, a minor child. The minor child, nowhere to be found. Had no idea if there was a guardianship who was looking after, and there was no relationship between the adult daughter and the minor child, the half-sister if you will.
The situation gets even more murky, as I personally interviewed all of the tenants of these properties, spent an entire day doing this, and I got various stories, but it sounded like there was a third party who was collecting rent. Hey, that’s a shock, right? So, somebody in the Hispanic community is collecting rent, and as it turned out, the second wife, who was now predeceased, and the octogenarian who was deceased, had this daughter, but we did not know if she was in the United States or anywhere to be found. There was no clues, no breadcrumb trail, and we had absolutely no idea, and there was nobody in charge of this trust.
Since we went down the line of this trust document that we had, but there was also a limited amount of time, so we began by working backwards, and decided that we needed to find someone who would be willing to be in charge. Then we go back to the older adult daughter, who is now a retiree, finally persuade her that she needs to step up and do this, because no private professional fiduciary wanted to take on the role too.
Now, interestingly enough, with these multimillion dollars of properties, which were otherwise free and clear but some several hundred thousand dollars in back property taxes, if no action had taken, what would’ve happened is these properties would’ve gone to tax sale, and what that basically means is that each of these properties would have been sold, at auction, for a fraction of their market value. Someone else would have to deal with the tenants and whatever else is going on with the property as far as code enforcement issues or whatever, which there was a little bit, but for the most part, someone else, or others, would have acquired these properties, one of them very close to the beach, within earshot. They would have ended up with properties at a substantial discount, built an equity, and really got quite a bargain at the being.
So, after speaking to several attorneys, and I’m getting dragged into this thing seemingly, as sort of a good Samaritan, because obviously, there’s nobody to pay me, and I’m trying to do the right thing, and I’m wondering, “Okay, how are we even going to find the minor child?” Because the older sister, or half-sister, had no relationship. Now the matter was going to be, “What are we going to do to get someone appointed, and then we can work this backwards by basically marshaling these assets, and either selling some off or doing a loan to the trust?” Which was actually my plan.
What we ultimately did is the older sister, the retiree, did finally lament and decide to act as trustee. But wait, she had no powers. There was no way to connect the dots. Just because her dad died, she was not named in the trust, Wells Fargo didn’t want to do this, minor child obviously could not be found. So what we did is we finally connected the woman with an attorney in San Diego, who was very experienced in these type of matters, and I spent another day dealing with this, and what I did was got the attorney, who assisted in going to court and getting the individual in Hawaii out of state, petitioned the court to get her appointed as successor trustee because of her relationship with her now deceased father, and no other individual either named in the trust or any other private party, party licensed, private professional fiduciary willing to take the matter on.
She was then able to take on the matter of the trust. Now she had power. She had capacity powers and authority to do what she needed to do, and the next matter was to find her younger half-sister, which she ultimately did through multiple connections. But what we were able to do with this property is we were able to save this property, and ultimately, the beauty of it was is that when this little girl, who was probably around 12 at the time, when she turns 18, which she actually has now, it’s left her a very comfortable estate.
That’s the beauty of having the right team who comes together, finds these situations, assembles them, and does the right thing for the parties. It’s not unusual to find these crazy scenarios. These sound like anomalies, but they somehow find my phone number, and contact me, and we work through them. Sometimes, they result in a transaction. Occasionally they don’t, but the thing I love doing, personally, is bringing the right resources in, giving people access to my team, and see that there is a happy conclusion to this. Thanks for joining me.
This episode is brought to you by closeprobate.com, loans and solutions for cash poor California estates and trusts. You are listening to The Gordian Knot, with Rick Harmon.