What are the Responsibilities of a Trustee When Selling Real Estate? | Illinois Trust Administration
If you are a trustee responsible for the administration of a trust after the passing of a loved one, you have a fiduciary duty to act in the best interest of the beneficiaries of the trust, within the limitations and instructions laid out by the trust document.
If a trust is in place and estate planning has been done properly prior to the death of the grantor of the trust, it should not be necessary to open a probate estate. However, if the beneficiaries disagree with the actions of the trustee, the beneficiaries may open a probate case and seek to make the trustee personally liable for mismanaged assets of the estate.
Trustee responsibility is fairly cut and dry when dealing with liquid assets like a checking account. However, the trustee's responsibility becomes more complicated when dealing with non-liquid assets like real estate.
When real estate is present in an estate, the trustee must first decide whether to transfer the real estate to one of the beneficiaries. This will usually result in a reduction of the share that the beneficiary is due from the remainder of the estate's assets or a payment from the beneficiary to the estate for the value of the home. An alternative to an insider transfer is to sell the real estate on the open market and distribute the proceeds among the beneficiaries.
Regardless of what is to become of the real estate, I recommend that the trustee seek written approval from all of the beneficiaries of the trust prior to the transaction. In the absence of this written approval, one or more of the beneficiaries may later claim that the real estate was sold to a third party or transferred to one of the beneficiaries for less than market value. The beneficiary could then open a probate case and seek to hold the trustee personally liable for breach of fiduciary duty.
For example, if the market value of a home is $400,000.00 and the Trustee sells it for $300,000.00, whether to a third party or to an insider, the trustee may be personally liable for the $100,000.00 difference between market value and sale price. However, if the trustee has received written agreement from the beneficiaries prior to the sale, the trustee will be able to rest easy knowing that she is protected from any future liability.
Illinois Law Blog: Learn About Law
O’Flaherty Law is based in Downers Grove, Elmhurst, and Naperville, Illinois. Our team has expertise in many areas of law including but not limited to bankruptcy law, business & corporate representation, civil litigation, criminal defense, estate planning, divorce & family law, immigration; probate, guardianship & elder law; and real estate law. If you have any questions or would like to schedule a free consultation, please e-mail us at firstname.lastname@example.org or call us at (630)324-6666.
Where You Can Read Us
O'Flaherty Law has experience in legal services in the following legal practice areas: estate planning and probate; featuring wills and trusts, powers of attorney, living wills, estate tax avoidance and probate practice; real estate law; featuring commercial and residential sales and leases, foreclosure defense, short sales, REO closings and consent foreclosures, mechanic's liens and landlord and tenant disputes; family law; featuring divorces, child custody, child support, paternity, adoption and orders of protection; criminal law; featuring DUI, traffic and criminal defense; business representation; featuring entity selection, incorporation and s-corp election, bylaws and operating agreements, annual reports, annual meetings of shareholders, employment agreements, handbooks and warning and termination letters, business contracts, independent contractor agreements, trademarks and copyrights, regulation and licensing compliance and dissolution and mergers; business and personal bankruptcy; featuring Chapter 7, Chapter 11 and Chapter 13 cases; litigation; featuring commercial contract and tort law, employment and labor law, personal injury and collections; and immigration law.
Located in Downers Grove, Illinois, O'Flaherty Law serves DuPage County, Will County, Cook County, Kendall County, Kane County and McHenry County in Illinois, as well as the following cities: Wheaton, Naperville, Woodridge, Downers Grove, Darien, Willowbrook, Westmont, Lisle, Oak Brook, Warrenville, Glen Ellyn, Aurora, North Aurora, Batavia, Geneva, St. Charles, Lemont, Joliet, Bolingbrook, Plainfield, Crest Hill, Lake Forest, Lake Bluff, Northbrook, Highland Park and Chicago.
© 2015 by O'Flaherty Law. All rights reserved.