Trust distribution problems.

[Richard Kravatz]

What is the name of your state (only U.S. law)? California

I am the Trustee of a Trust. The Trustor passed away a year ago so I am getting close to getting this trust settled. The Trust owns a piece of property worth about a million dollars and there are three beneficiaries to this property. Two are family members of the Trustor and one was a lifelong friend of the Trustor. The two family members want to buy the property. The third beneficiary wants to sell his 1/3 but not necessarily to the other two. The property has been appraised and in this down market it is not worth what it was about 4 years ago so the third beneficiary says he is willing to sell it to the other two but wants more than 1/3 of the appraised value and they don't want to pay him more than 1/3 of the appraised value. Yea, what to do. I can't force the third beneficiary to sell at any price for that matter but I am trying to get these people who all hate each other to agree on something so we can settle this. Any ideas ? I can distribute the property in thirds I guess and just let them fight it out later after I am out of this deal but if I do that it won't settle anything for them. Not sure what to do here. The Trust does say I can distribute to the beneficiaries in like or in kind so I guess I could sell the property and then just pay each one a third but that might get me in hot water as the Trustee. Never again will I agree to being a Trustee, what a pain in the butt.

 

[TrustUser]

does the trust allow for it to continue, keeping the asset in the trust ? if so, that opens up some possibilities that you might not have considered.

how specific can you be in telling us what the trust says about distributing the property ? as trustee, you need to follow those directions.

but it does sound as if you have quite a bit of latitude. so one thought is that you tell the beneficiaries that you will give them so much time to come up with a dollar amount that is acceptable to all, so that the one beneficiary will sell his share to the other two. if not, the property will be sold, and cash distributed in thirds.

i think you need to make sure that they know that you are in control, and wont fiddle faddle forever with them. that gives them a good incentive to work things out amicably. i get the feeling right now that they are controlling you. and if that is the case, they aint ever gonna come to an agreement.

 

[anteater]

The Trust does say I can distribute to the beneficiaries in like or in kind ...

Why not take the "in kind" option and get yourself out of the middle?

 

[tranquility]

I can't force the third beneficiary to sell at any price for that matter but I am trying to get these people who all hate each other to agree on something so we can settle this. Any ideas ? I can distribute the property in thirds I guess and just let them fight it out later after I am out of this deal but if I do that it won't settle anything for them. Not sure what to do here.

Send them a letter telling them to come to agreement for how to handle the property by such and such a date or you will distribute it in kind.

Not in the letter, but when you talk with them, tell them the expense they will have to partition the property. It will probably be a lot of litigation (maybe not, if no one has invested anything) and many attorneys and will result in a bargain sale all will split. If that does not motivate them, distribute as promised.

By selling and distributing, you may risk a fiduciary breach. Maybe not and the damages should be slight, but risk. I hate risk and just choose the safe path when I am acting in the stead of others.

 

[Richard Kravatz]

Actually, the Trust does all me to continue operating the Trust as a business for as long as the Trustee (me) deems necessary. The property is actually a 40 acre ranch. The problem is actually the two family member beneficiaries. They feel the ranch should be theirs totally and the other beneficiary should not even be a part of it but that is beside the point as the Trust is specific and the fact they don't like it doesn't matter.

I will probably put a date on them and if they don't have it together by then I will sell the property on the open real estate market and then just distribute the funds.

I have learned one thing over the past 10 years. Never become a Trustee for anyone again.

IN California, what is the proper % of the total value of the Trust I should charge as a Trustee fee when this thing wraps up. I have heard varying numbers but nothing specific. I have been charging 1% per year of the Trust value but I think I am entitled to a final percentage also, not quite sure. It truly has been a major pain in the butt due to the in-fighting amongst the beneficiaries. I do have a very good Trust accountant who helps me keep track of every single penny.

 

[anteater]

I will probably put a date on them and if they don't have it together by then I will sell the property on the open real estate market and then just distribute the funds.

Since you can distribute in kind, why are you so intent on selling?

 

[tranquility]

I will probably put a date on them and if they don't have it together by then I will sell the property on the open real estate market and then just distribute the funds.

I have learned one thing over the past 10 years. Never become a Trustee for anyone again.

Better would be to do the job you DID take without breaching your fiduciary duties.

Answer anteater's question.

If you sell with only the facts you're giving now, I bet you will be sued and will lose.

 

[Richard Kravatz]

Since you can distribute in kind, why are you so intent on selling?

Due to the relationship of the three beneficiaries. If I did that there would probably be a murder in less than a year. It would be like a partnership between the US, North Korea, and Iran.

 

[Richard Kravatz]

Better would be to do the job you DID take without breaching your fiduciary duties.

Answer anteater's question.

If you sell with only the facts you're giving now, I bet you will be sued and will lose.

NO, I am not going to get sued. I won't put myself in that position. So Tranquility, what would YOU do given the facts I have stated? How would YOU make everyone happy, settle the Trust and not get sued in the process?

Have you ever been a Trustee of a Trust ? Just curious as to how accurate your advice or opinion might be.

 

[tranquility]

I have given you the advice of an experienced trustee. (Experienced enough to have to register with the state.)

Getting sued is not the problem, getting sued and losing is the problem.

How would YOU make everyone happy, settle the Trust and not get sued in the process?

To start, I'd stop worrying about everyone being happy and start worrying about my fiduciary duties. NONE of those duties have to do with the happiness of the beneficiaries.

However, with the justification you have presented, you may very well be sued by the unhappy party(s) and you WILL lose. You would be in breach of your fiduciary duties if your stated reason is why you will sell. (Unless there was a specific trust provision for such happiness.)

 

[anteater]

Where did you get the idea that one of the duties of a trustee is to make everybody happy? You don't have to be a Nanny to the beneficiaries.

While Tranq can provide his own response, mine would be:

Once I realized that the beneficiaries were having trouble working and playing well together, at the first opportunity, I would have said, "Here's the new deed. You are now co-owners of the property. Knock yourselves out and don't expect me to play referee."

 

[Richard Kravatz]

Where did you get the idea that one of the duties of a trustee is to make everybody happy? You don't have to be a Nanny to the beneficiaries.

While Tranq can provide his own response, mine would be:

Once I realized that the beneficiaries were having trouble working and playing well together, at the first opportunity, I would have said, "Here's the new deed. You are now co-owners of the property. Knock yourselves out and don't expect me to play referee."

Anteater, I like your idea the best. I just like making people happy but realize that is not always possible. Especially in cases like these that develop. It doesn't hurt to try to make people happy.

I am going to give it another month and try to get the two to buyout the one and if we can't get it done I will simply distribute the property in thirds and let them hash it out on their own. Murder or not, not my problem. ha ha

Maybe I'll just resign as Trustee and make the third beneficiary the Trustee and let them then hash it all out. That would really make them unhappy but hey, I am not their Nanny.

 

[TrustUser]

you can certainly choose to retire. if you want to finish the job, just make sure that your actions are in line with what the trust document states.