Trust Property Sale

Washington

If an irrevocable trust contains real property, can that property be sold by the trustee? Are there any restrictions?

Thanks

it all depends on the trust agreement. the fact that it is irrevocable has nothing to do with it.

generally, the trustee has the power to act. but that power can and often is restricted to some degree by the owners (beneficiaries).

again, it all depends on how the trust agreement is worded.

No. The beneficiaries generally have no control over the determination of if the trustee sells the property. If they do, the trust may fail and all sorts of legal-like things may happen. (Sometimes, there are intentionally defective trusts which use this technique, but their discussion is well beyond this forum.) In addition to the terms of the trust, the particular state's statutes may also guide. For instance, in some cases real property sales may require court oversight unless the trust uses very specific language to allow such sales.

hi lorenzo,

it is actually prudent to give the owners the final say on things.

but there should also be a clause in one's trust that indemnifies the party that is doing business with the trustee.

most trusts have this type of language : People and institutions dealing with the Trustee shall not be required to do the following 2 tasks: [(1)see to the application of any money or other property delivered to the Trustee; (2)inquire into the necessity or propriety of any action taken by the Trustee.]

so that if the trustee does act inappropriately, the beneficiary can not go after the other party, just the trustee.

a particular type of trust in which the beneficiary has total control over the proceedings is what is commonly referred to as a "title holding trust".

It all depends on how the trust agreement is worded. Typically, the trustee has absolute discretion to sell/rent/do whatever with the real estate property he/she deems fit as long as the profits from his/her actions go back into the trust to later be distributed to the beneficiaries.

There are some cases where the beneficiaries are given the power to dictate what they want done to the trustee but that isn't very common as the whole point of a sole trustee is to avoid conflict and a group of people all with a stake/interest in a real estate property making decisions about that property isn't likely to go smoothly.

Also, it doesn't matter whether it is a revocable or irrevocable trust, both are trusts in which the trustee has authority (absolute or partial depends on the agreement like I said) to dispose of the property as he/she deemds fit. There is another thread on here that details what is a revocable and irrevocable trust, so if you want to know the difference, Lorenzo, go have a look.

a particular type of trust in which the beneficiary has total control over the proceedings is what is commonly referred to as a "title holding trust".

Click to expand...

Legally, a trust in which the beneficiary has total control is either a revocable trust or dies from the concept of merger.

hi tranquility,

i have some of my properties in title holding trusts. they do name a beneficiary.

and since the property doesnt necessarily get re-titled, the new beneficiaries have that same control.

however, i could see why it might be considered to be "revocable". the new beneficiaries would be able to sell the property, and do what they want with the money.

when i said "total control", i meant that the beneficiaries tell the trustee what they want done. the trustee still signs the documents.

it is common with title companies, and it started in illinois, but is commonly used in most, if not all, states. which is why it is more formally called an Illinois Land Trust.

it is of my opinion that a trust should give the beneficiaries total control, in that they should be able to dictate what they want. obviously, it is easier to defer to the trustee as much as possible. but the beneficiaries should be able to lay the hammer down, if needed. and of course the same is true about replacing the trustee. the beneficiaries should be able to do that at any time and for any reason.

one should look at the trustee as a hired contractor, which is exactly what he is.

i would almost always want the beneficiary to be consulted before selling or acquiring any sort of large asset. input from the trustee would of course be greatly appreciated, most of the time.

these are just my opinions. and i respect that your opinions may be different from mine.

Words matter in trusts. It is a private agreement which has and limits the principals' and the world related to property. There are many terms of art which are tested in the courts. Does each word always make a difference? Of course not. Most times the trust is not tested and the courts and experts knowledgable in the law don't test it. Sometimes they do and casual use of terms will cause major problems. I've seen it. I've sued and been sued on it and have spent (actually spent trust money) six figures fighting over words.

Basic trust law has a trust dissappear through the concept of merger when the beneficiary and the trustee are the same. Court cases have found that when the beneficiary has total control over the trustee's actions they stand in the shoes of the trustee and merger occurs. Modernly, to defeat this basic legal principle, the concept of trust protector has come into use. The trustee has the power, the trust protector has the unfettered power to remove the trustee and the benficiary has the power to remove the trust protector. Same result without the merger.