Selling or Transferring Real Estate in a Trust

As a trustee or successor trustee of a Trust, you may need to sell and/or transfer real estate from that Trust as part of the administration of an estate.  There are unique issues with this process that require special attention to ensure that you are not held personally liability for failing to meet your fiduciary duties.

What is Trust?

A Trust is basically a written agreement setting forth the wishes of the grantor (the person making the Trust) and the trustee (the person who is obligated to follow those wishes).  That agreement establishes a fiduciary relationship.  The word “fiduciary” simply means a relationship of trust and confidence.  The purpose of the Trust agreement is to grant power to the trustee to manage the Trust assets and distribute those assets to the beneficiaries named in the Trust.  The trustee must follow the terms of the Trust agreement when distributing the assets of the Trust.  Typically, a Trust is used in place of a will in order to avoid Probate of the estate assets after the grantor dies.  However, it is not unusual to have a basic will in place alongside the Trust just to cover any assets which may have been omitted from the Trust agreement (this would require probate as to those assets only).

What are the Responsibilities of the Trustee?

A trustee must act in accordance with the terms of the Trust agreement and owes a fiduciary duty to the estate and the beneficiaries.  The trustee cannot act for his or her own self interests.  Failure to follow the terms of the Trust agreement can lead to personal liability for the trustee.

Usually, the Trust agreement makes it very clear how liquid assets should be distributed.  Therefore, cash, checking and savings accounts can be distributed as required in the Trustee agreement without significant complication.  However, real estate is more complicated.  With real estate, the trustee must first determine whether the property should be transferred to one of the beneficiaries.  That type of allocation may require a reduction in the remaining share of the estate which that beneficiary is to receive.  The trustee will need to understand the value of the real estate that was transferred and the calculation of the reduced share of the remaining estate for the beneficiary in question (a bookkeeper may be required to make these allocations for the trustee).  Alternatively, the Trust agreement might require the real estate to be sold and the proceeds distributed among the beneficiaries (either equally or in some unequal distribution).

The trustee will be placed under significant scrutiny and must specifically follow the Trust agreement.  Having the assistance of an attorney is very beneficial.  Additionally, the trustee should consider engaging a Free Legal Liaison to coordinate all the issues involved.

Does the Trustee Need Written Authorization to Sell Trust Assets?

Although the Trust agreement provides all the authority needed, it is highly recommended that a trustee obtain written consent from all of the beneficiaries before selling any real estate.  Securing unanimous approval from all beneficiaries will safeguard the trustee from any post-sale claims that the trustee sold the real estate below market value.  In the event a beneficiary challenges the sale or files a probate case to battle the Trust agreement, the prior written consent will be very good evidence that the trustee acting within his or her fiduciary duty.

Do I Need to Hire a Real Estate Attorney to Handle this Matter?

Hiring an Attorney/Realtor to handle the listing, marketing and sale of the real estate will provide another layer of protection to the trustee. The Attorney/Realtor will provide the trustee with a Comparative Market Analysis showing the current value of homes that recently sold and the market trends for the area in which the real estate is located.  From those reports, the trustee can coordinate with the Attorney/Realtor to determine if any work must be done to the real estate to bring it to market value and then select a listing price.  By using a Realtor that is trained in the law and holds a license to practice law, the trustee can rely upon that professional to draft specific contract provisions to protest the trustee, the estate and the beneficiaries in the negotiation, sale and closing processes.

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LAWYERS REALTY GROUP is an attorney owned and operated real estate brokerage that was formed to help level the playing field between struggling homeowners and the banks who are threatening them with foreclosure, eviction, deficiency judgments, and collection actions.

Unlike traditional real estate agents, loan mod companies, bankruptcy attorneys, litigators and others who aggressively market their particular one-size-fits-all solution regardless of a homeowner’s future liability and financial well-being, Lawyers Realty Group provides clients with a customized analysis of their options, free legal counseling and clear direction on how to best resolve their particular mortgage issues – all without charging fees to the homeowner.

Derik N. Lewis, Esq., is the founder and president of Lawyers Realty Group. Derik is a California real estate attorney and a licensed Realtor® . He graduated magna cum laude from Boston University School of Law and has nearly 30 years of real estate experience. For more than two decades as an attorney in private practice, Derik has represented California homeowners with difficult real estate matters. Derik previously served as legal counsel for some of the world’s largest lenders including Bank of America, Wells Fargo and JPMorgan Chase (he knows how they operate and how to work within their systems to help you achieve the best possible outcome). He is also a visiting lecturer at the University of Southern California School of Law speaking on real estate law, brokerage and litigation.

Professional Associations

  • Admitted to all State and Federal Courts in California
  • California Bar Association
  • Orange County Bar Association
  • National Association of Realtors
  • California Association of Realtors
  • Orange County Association of Realtors
  • California Regional Multiple Listing Service

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