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Buying Property From the Trust as a Beneficiary

There are times when a trustee is approached by one of the trust beneficiaries and the trust beneficiary says, “Hey, I really like the cabin in Big Bear. I’d like to buy the cabin in Big Bear.  Can you sell it to me?” And the trustee’s response should be, “It depends on how other trust beneficiaries feel about that.”

Approaching the Beneficiaries

The trustee would want to approach all beneficiaries and say, “Hey, this one beneficiary wants to buy the Big Bear cabin. I’ve had it appraised by an independent appraiser and it’s X dollars and the beneficiary is willing to pay X dollars for it.  Is everyone ok with that?” As long as all the beneficiaries sign off on that, chances are that’s going to be an ok transaction.

 

Potential Problems

The problem occurs when one or more of the beneficiaries have a problem with another beneficiary purchasing real property from the trust.  As a trustee, you have a choice to make. You can petition the probate court and ask the probate court, “Is it ok that I allow this one beneficiary to buy the Big Bear cabin?”  Or, you can ask the probate court, “Should I liquidate everything and then just make distributions of cash to everyone?”

There are two basic ways to address this:  Number one, do it by consent of everybody involved.  If anybody objects, go to court and ask the court, “What should I do here, Your Honor, can I sell it to the one beneficiary at the appraised value. Or should I liquidate it, sell it to a third party in an arm’s length transaction, and then give cash to everyone else that’s a beneficiary.”

The California trust and estate litigation attorneys at Albertson & Davidson can assist in matters related to trust disputes and will limitation.