Asked in Estate Planning, Real Estate Law and Elder Law for California

Q: Can a trustee sell property of the estate to a beneficiary privately at under market value?

My relative has dementia and the Trustee of their estate is selling properties of the estate at below market value and in private to a beneficiary of the trust. They sold a property of the estate without putting it on the market or telling the other beneficiaries. It was sold under market value. There is also a property that the trustee (along with beneficiary) has stated that they should just "give away to the county". How does this benefit the trust? My relative does not need immediate funds for their care, so why the hurry and under market value sales? Is this legal?

2 Lawyer Answers
Jeffrey Louis Gaffney
Jeffrey Louis Gaffney
PREMIUM
Answered
  • Estate Planning Lawyer
  • Carlsbad, CA
  • Licensed in California

A: This is absolutely not allowed.

A trustee has the duty to treat all beneficiaries fairly and equally, and to protect the assets of the trust. This sounds like the trustee violated both of these tenets.

If the trustee is not doing his duties, you will probably need to ask a judge to remove and replace him.

The trust may have a Trust Protector who can step in and do this for you. Not all trusts use this, but the Trust Protector is a person assigned to be a back door overseer of the trustee, with the power to replace him/her. Take a look in the trust to see if you have that provision.

Greg Freeze
Greg Freeze
Answered
  • Estate Planning Lawyer
  • Port Townsend, WA
  • Licensed in California

A: The (new) trustee needs to follow the rules about being a trustee. You probably need to get an attorney to protect your future interests. The trust is not likely in payout mode, triggered by some dementia clause. But, you have to read the trust, just to make sure that it doesn't include something creative regarding dementia (highly unlikely).

Once the trust is reviewed, your attorney can draft a letter to the trustee or the trustee's attorney, to get to the bottom of the transactions. Fair market value doesn't mean an asset has to be "listed" on the market, but it does mean that procedures are followed to arrive at fair market value. You can bet that if an attorney is involved, the attorney will want that procedure documented, including getting all the future beneficiaries involved in any "asset shedding" that might be undertaken for tax planning purposes.

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