San Diego Estate Planning Lawyer Blog
Dealing with real estate is often the most complicated part of estate planning, particularly if you want to provide for multiple family members. Unlike cash or stocks, it can be logistically difficult to divide a house or a rental property among multiple children. In many cases it makes sense to direct the executor of your estate (or the trustee of your trust) to sell the property upon your death and divide the cash proceeds among your designated beneficiaries.
Leaving it Up to Your Trustee
Then again, there are cases in which you might want to afford one member of your family the chance to keep the property. For example, your will might give one person the right to purchase your house upon your death. Such provisions must be carefully drafted by a qualified attorney to avoid any misunderstanding or confusion.
Even then, there may still be problems. Consider a recent trust dispute from Sacramento. Here, a man (the settlor) created a revocable living trust that held a piece of property in Elverta, California. The settlor appointed one of his granddaughters as successor trustee, who assumed control of the trust when he died in 2011.
The trust instructed the granddaughter to sell the property to one of the settlor’s daughters “or any of her children” for a price of $100,000 below the appraised value of the property. If none of these people purchased the property, the trustee was directed to sell it at “fair market value.” The proceeds of the sale would then be divided among the settlor’s children and grandchildren.
The settlor left the actual choice of buyer to the granddaughter. She could have sold the property to either herself, her mother (the settlor’s daughter), or her brother. She eventually sold the property to her mother for $265,000, which was $100,000 less than its appraised value. The trustee and her husband then loaned her mother finance the purchase of the property. More than a year later, the property passed to the trustee and her husband when the mother “was unable to pay on the loan.”
The brother then sued his sister, claiming the sale was a “sham.” He alleged his sister improperly sold the property to herself and her husband. But the courts said the sister did nothing wrong. She did, in fact, sell the property to her mother and deposited the proceeds into the trust. The fact the sister and her husband helped finance the sale was irrelevant. The trust only directed the property be sold to one of three designated individuals; it said nothing about how the selected buyer would pay the stated purchase price or what would happen to the property after it was no longer in the trust.
Need Help With Estate Planning Decisions?
While the facts of the above case are somewhat unusual, it does illustrate the broad latitude a settlor can give a trustee to sell or dispose of property in a trust. Family members are not allowed to second-guess your estate planning decisions just because they disagree with them. But it is important to make sure your decisions are clear and provide appropriate guidance to your executor or trustee. If you need advice from an experienced San Diego estate planning attorney on how to best handle the disposition of your real estate, contact the Law Office of Scott C. Soady today.