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Generally, a beneficiary can buy property from a trust, subject to certain procedures and provisions that may be provided in the trust document.
Restrictions in Trust Documents
Whether or not a beneficiary can buy trust property will first depend on the provisions of the trust document. Although not very common, the trust document may prohibit the sale of trust property for a particular period of time or to a particular person or may prohibit the trustee from committing certain acts, which may include selling trust property. However, if there is no express prohibition in the trust document, the general rule is that trust property may be sold with the proceeds managed by the trustee.
Restrictions By Law
There may be restrictions to the sale of trust property, especially when these restrictions are made by court order. For example, if there is a lien on trust property, the property can only be sold, subject to the lien. If the trust property is restrained from being sold through a preliminary injunction or temporary restraining order issued by the court, the property cannot be sold to the beneficiary because it will be in violation of a court order. Reviewing the particular circumstances of each case is important when determining whether a beneficiary can buy trust property.
Procedure in Selling Trust Property to Beneficiary
In any sale of trust property, it is important to know its fair market value. The best way in determining this is by having the property independently appraised. An independent appraisal of trust property will erase any doubts from the other beneficiaries that trust property is being sold by the trustee below market value.
Once the fair market value is determined, the beneficiary-purchaser and trustee can now negotiate the terms of the purchase. The trustee is bound to avoid any perception of conflict of interest and to ensure that he is always acting for the best interest of the trust. For this reason, the trustee should always secure the best terms for the sale from the beneficiary-purchaser.
Once the terms are agreed upon, the beneficiary and trustee can document the purchase through a document or deed of sale. The sale may need to be notarized, witnessed, and/or recorded depending on the type of property involved.
Most of the time, the trustee does not need to secure the consent of the other beneficiaries in selling trust property. However, if any beneficiary feels that sale was made with conflict of interest, below market value, or to the detriment of the trust and the other beneficiaries, they may question the sale in court and may request that any damages be charged to the trustee.
For the reason, the trustee may wish to consult an experienced trust attorney before selling trust property. Trust matters may be complex and require careful planning and adherence to legal requirements. Should you have any issues regarding trust matters, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].
About the Author
Albert Goodwin Esq. is a licenced New York attorney with over 17 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
