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 trust property 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.
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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Can Trustees Be Held Personally Liable?
The Trustee’s Guide to Trust Distributions
The Trustee’s Guide to Avoiding Trustee Removal
The Guide to Breach of Fiduciary Duty and Abuse
About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.