A trustee does not need beneficiary approval to sell trust property. However, a trustee who wants to avoid litigation would be wise to at least seek approval of the trust beneficiaries, and, at a minimum, be able to substantiate why the property was sold and how that sale benefited the trust beneficiaries.
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Who Has the Legal Title of the Property in a Trust?
The trustee is the legal titleholder of trust assets and property. The trustee holds and manages trust property as a fiduciary for the benefit of the trust beneficiaries. While the trustee holds legal title to trust property, the trust beneficiaries hold equitable title as the beneficial owners of that property until the property is distributed to them, at which time the title will be changed into their names.
Does a Trustee Have Power To Sell Property?
Unless restricted by the specific terms of a trust document, a trustee has the power to sell (or encumber) trust property, and without the permission of the trust’s beneficiaries. As long as the trust allows it, and the trustee avoids self-dealing and conflicts of interest, the trustee can sell property from the trust to whomever he or she chooses, as long as it is sold for market value.
Often, trust disputes arise when a trustee sells property for what beneficiaries deem a sub-market price. Similar problems also arise if a trustee appears to be working for their own interests, such as selling property to themselves or another trust or company they manage. Even if the terms of the trust explicitly allow a sale to the trustee, transparency and avoiding self-dealing and conflicts of interest can go a long way to keeping trust beneficiaries happy.
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Serving clients across California and Texas
RMO provides legal support to ensure your rights are upheld and your inheritance is protected.
Serving clients across California and Texas
What Happens When a Trustee Sells Property?
A trustee has a duty to make trust property productive and to avoid waste. What this means is that when a trustee sells trust property they have a duty to reinvest the sale proceeds in a manner that is profitable to the trust for the ultimate benefit of the trust beneficiaries.
To avoid disputes or legal challenges, a trustee should be transparent about the potential sale of trust property. Beneficiaries hate surprises, and selling a loved one’s assets is a surprise sure to lead to a beneficiary taking action.
To protect against a potential challenge, a trustee also should document his or her efforts to secure market value for any asset being sold. What this means is getting broker opinions of value, real estate appraisals, business valuations, art appraisals, etc. The values themselves should be documented, as well as the trustee’s efforts to obtain those values so the trustee can demonstrate to beneficiaries that the trustee took reasonable efforts to secure the highest prices.
Not all trustees do what they should, and if you believe a trustee breached their fiduciary duty by selling property below market value, is selling property that cannot or should not be sold, or if you are trustee being accused of breaching your fiduciary duties, you should consult an experienced trust litigation attorney who can help you determine what your rights and responsibilities are so you can protect yourself.
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Frequently Asked Questions
Generally, the trustee has the authority to sell trust property, provided the power to sell is explicitly granted in the trust instrument or allowed under applicable state trust law. The trustee must act in good faith, with loyalty to beneficiaries, and within the scope of their fiduciary duties. If the trust document imposes constraints or conditions (such as requiring beneficiary consent), the trustee must comply. In some cases, co-trustees or successor trustees share that authority, or court approval may be needed if the trust is silent or unclear.
Yes—a beneficiary may attempt to stop a trustee’s sale under certain circumstances, especially if they can show:
• The trustee acted outside their powers or breached fiduciary duty.
• The sale is not in the best interests of the beneficiaries or violates trust terms.
• The trustee failed to provide notice or follow required procedures.
To do so, the beneficiary would need to petition the court, present evidence, and possibly seek injunctive relief or removal of the trustee.
After the trustee sells trust property, proceeds are first used to satisfy trust expenses, debts, taxes, and administrative costs. Next, any amounts specified to particular beneficiaries are paid. Finally, the remaining balance is distributed to the residual beneficiaries according to the terms of the trust. If the trust authorizes it, the trustee may hold undistributed proceeds temporarily (invested) or allocate earnings until final distribution.
