In a previous post, we explained what Probate* means and how a property owner can avoid their estate going into Probate. In this article, we'll explain a Trustee's role* in the process.
A trust is a legal arrangement in which one party, known as the trustor or settlor, transfers property to a second party, known as the trustee, to manage the asset for the benefit of a third party, the beneficiary. Trusts are commonly used for estate planning to control and protect property, ensure privacy, avoid probate, and, in some cases, reduce tax burdens.
When involving real estate, such as a house, the trust document explicitly outlines how the asset is to be handled. It's the trustee's role to ensure that the management and eventual sale of the house align with the trust’s terms while adhering to their fiduciary duties.
In the context of a house sale, a trustee is an individual or an entity responsible for managing the property that is held in a trust. The role of a trustee in a house sale is typically defined by the terms of the trust agreement and by state law. Generally, a trustee's duties may include:
Fiduciary Responsibility: The trustee must act in the best interests of the beneficiaries of the trust, ensuring that the property is sold for fair market value and that the transaction benefits the beneficiaries as stipulated by the trust agreement.
Managing the Sale: The trustee oversees the sale process. This can include hiring real estate agents, setting the sale price, marketing the property, and negotiating with potential buyers.
Compliance with Trust Document: The trustee must comply with the terms set forth in the trust document, which could specify certain conditions or limitations regarding the sale or disposition of the house.
Title Transfer: If a sale is to be completed, the trustee is responsible for ensuring that the title is clear and that all legal requirements for the transfer of the property are met.
Distribution of Proceeds: Once the property is sold, the trustee handles the proceeds according to the trust's instructions, which might mean distributing them to beneficiaries or reinvesting them, depending on the trust's stipulations.
Tax and Legal Considerations: The trustee is responsible for addressing any tax implications resulting from the sale and must ensure that the transaction complies with all relevant laws and regulations.
Reporting to Beneficiaries: The trustee should keep the trust’s beneficiaries informed about the transaction and provide accounting for the proceeds of the sale as required.
Payment of Debts and Expenses: The trustee pays any expenses related to the sale, like brokerage commissions, as well as any debts or liens against the property out of the sale proceeds before distributing the remaining funds.
Being a trustee is a big responsibility. It's important for the trustee to consult with legal and real estate professionals to comply with their fiduciary duties and handle the transaction appropriately. Trustees are held to a high standard of care, and failure to perform their duties properly can result in legal consequences.
As a Certified Probate Real Estate Specialist (CPRES) Heyler co-owner Jae Wu and her team are ready to help answer any follow-up questions. Please email her at [email protected] or call 310-470-2030.
*The summary of the probate process is provided for informational purposes only, and should not be relied upon or considered advice on any matters of law. If you have questions regarding trusts, estates and probate please consult with a qualified California attorney.
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