Beneficiaries have a unique relationship with a trust and its trustee. Sometimes, situations arise that result in a beneficiary buying property from a trust. Trusts are governed by the terms of the trust as well as California Law. They are governed by complex rules to ensure equity and fair dealing in order to protect all beneficiaries. In some situations, a beneficiary is within their rights to buy trust property, but it must be done to ensure all beneficiaries are treated equally in order to avoid lawsuits. Working with a lawyer to ensure any beneficiary’s purchase of trust property is done legally, ethically, and in the open.
At Gokal Law Group, we have helped countless beneficiaries enforce their rights when trustees exploit their power or show favoritism. We have successfully recovered millions in settlements and trial verdicts for clients. We have also guided trustees to ensure they do not violate any rights of beneficiaries and protect the trust from wrongdoing. Here’s what to know about beneficiaries buying trust property.
Is a Beneficiary Buying Property from a Trust Allowed in California?
Technically, there is no law prohibiting a beneficiary buying property from a trust. But this could still cause complications depending on how the trustee conducts the sale. Imagine there are three beneficiaries of a trust: Purple, Blue, and Green.
In this situation, the trustee approaches all of these beneficiaries and says that Blue wants to buy a cabin held by the trust. The trustee has hired an independent appraiser to appraise the property, and Blue will pay the property’s market value.
If Purple and Green are okay with it and sign off on this decision, then this transaction is no cause for concern, and it is a good sign that the trustee is upholding their fiduciary duty.
Related Article: What is a Conflict of Interest Between a Trustee and Beneficiary in California?
When is a Beneficiary Buying Property from a Trust Not Allowed in California?
Unfortunately, trustees do not always act transparently or ethically. When the circumstances surrounding a beneficiary buying property from a trust are suspicious, suggest favoritism, or are not for far market value, a serious issue could exist.
For example, imagine Purple wants to buy property from the trust, as do Blue and Green. If a trustee plays favorites and arbitrarily decides to sell this property to Purple without considering selling it to the other beneficiaries, this is technically a breach of fiduciary duty.
One core fiduciary duty a trustee must uphold is the duty of impartiality, meaning they can’t favor one beneficiary over the other. Another situation that might occur is when the trustee is also a beneficiary and they sell the property to themselves below market value.
If a trustee sells trust property below market value, this breaches their fiduciary duty. Further, if they benefit from the sale in any way, this is another breach altogether. Trustees must avoid conflicts of interest between themselves, beneficiaries, and the trust. Other potential issues include:
- Failing to have an appraisal to get an accurate value before selling the property
- Providing favorable conditions to the buyer that harm the beneficiaries, like allowing excessive extensions or making costly repairs.
- Failing to uphold the conventional formalities of selling real estate, like signing a purchase agreement.
- Ignoring or rejecting other buyers who are willing to pay more for the property or willing to close on the transaction faster than the beneficiary.
This is just the beginning. If any of these situations sound like the one you are in, contact a California trust litigation lawyer ASAP.
Anytime you suspect a trustee is breaching their fiduciary duty, it is imperative to work with a trust litigation attorney to hold them accountable, secure your inheritance, and defend the trust.
“A beneficiary buying trust property is not a cause for concern if the trustee is transparent and acts impartially. Unfortunately, that is not always the case. We have cases where trustees sell a trust property to one beneficiary under the fair market value, or secretly sell the property to themselves, breaching their fiduciary duties. As soon as you suspect that a sale violates the trustee’s obligations of fairness, it is imperative to work with an attorney to enforce your rights and safeguard your inheritance.”
– Ali Nicolette, Associate, Gokal Law Group
Is a Beneficiary Buying Property From a Trust Under Dubious Circumstances? Let Us Safeguard Your Inheritance.
If you are in a situation where there’s a beneficiary buying property from a trust and you suspect that the trustee is breaching their fiduciary duties, it is essential to work with a trust litigation attorney. Only a lawyer will have the expertise and experience you deserve to enforce your rights, hold this trustee accountable, and defend your inheritance.
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