Can a Trustee Sell Trust Property Without All Beneficiaries Approving?

Dec 6, 2023
Estate Planning

Trustees have fiduciary responsibility for managing a trust, so they must act in the best interests of the beneficiaries and in good faith. Can a trustee sell trust property without all beneficiaries’ approval? It depends on the trust type and terms. However, in most instances, the trustee does not need approval to sell property held in the trust.

Can a Trustee Sell Trust Property Without All Beneficiaries Approving in a Revocable Trust?

A revocable — or living — trust can be amended or revoked without approval from beneficiaries. During a grantor’s lifetime, the grantor is often also the trustee for a living trust. This trust type is advantageous if you want to protect your beneficiaries from the expense and hassle of probate court. It’s also beneficial for you while you are still alive. You have complete control over the assets within the trust, whether you are the trustee or have someone else handling the trust management responsibilities.

While you are still living, you can add or remove assets, change beneficiaries and alter the trust terms. As a trustee, you can sell trust property without all beneficiaries approving. If you decide to name another trustee, you still have the decision-making authority. The trustee doesn’t need heirs' approval but requires your permission unless the trust terms stipulate otherwise.

Once you pass, your successor trustee becomes the trustee. Generally, the trustee has the latitude to sell property within the trust as long as they adhere to the terms. The trust terms provide the directive for what the trustee can do. State laws and court precedents also establish guidelines about a trustee’s authority. In some states, the trustee may have the right to sell trust property without the approval of all beneficiaries, even if the trust terms state otherwise.

Can a Trustee Sell Trust Property Without All Beneficiaries Approving? | AmeriEstate Legal Plan

When the Trustee Can’t Sell Trust Property in a Revocable Trust

Sometimes, a trust will include a directive for the trustee to consult with beneficiaries before taking action with any assets. Consultation does not necessarily mean that all beneficiaries must approve the sale, only that the trustee must discuss their actions before selling. Whether the trust document stipulates a consultation requirement, trustees should be transparent about their intentions to sell. Failure to do so can lead to legal challenges for trustees if beneficiaries believe they ignored their fiduciary responsibilities.

Your beneficiaries could sue the trustee if they feel the person you chose to manage the trust did not act in their best interest. Often, issues arise when heirs believe the trustee sold an asset for less than market value or purposefully kept them out of the loop when making decisions about property their loved one set aside for them. AmeriEstate attorneys will work with you to ensure your trust protects your heirs and establishes clear responsibilities and powers for your successor trustee.

Trustees also must adhere to ethics standards when managing trusts. They cannot sell a property if it presents a conflict of interest. For example, a trustee who sells an asset to another trust they manage would be a conflict of interest. Selling it to themselves could be as well, though sometimes trust terms allow a trustee to sell an asset to themselves. Even if the trust terms allow it, trustees must adhere to them and maintain thorough and accurate documentation to ensure transparency and legality.  

Can a Trustee Sell Trust Property in an Irrevocable Trust?

Irrevocable trusts are less common than revocable trusts, as they generally cannot be amended or dissolved without explicit approval from all beneficiaries. The process to alter a revocable trust is time-consuming and may require a judge’s involvement. An irrevocable trust provides greater protection against creditors, protects you from estate taxes and removes assets from income consideration for Medicaid-funded long-term care.

However, a trustee cannot sell a trust property without all beneficiaries approving. If you set up an irrevocable trust, you won’t be able to offload any of the assets — even if doing so would provide a long-term benefit for you or your heirs — unless all beneficiaries sign off on the sale.

Who Has Legal Ownership of Trust Property?

The trust has legal ownership of trust property. The trustee is also the titleholder for any real property in the trust, such as a house. However, the trustee’s role is to manage the assets within the trust for the beneficiaries’ benefit. Though the beneficiaries won’t own the assets until the trustee disperses them according to the trust terms, they have legal rights to acquire ownership through the dispersal.

Can the Trustee Sell the Property to Anyone?

Trustees can sell the property to anyone as long as there is no conflict of interest. They must ensure the assets sell for fair market value. Trustees should obtain an appraisal from at least two neutral, qualified professionals, such as brokers, and document the valuation they received from each. Additionally, they need to thoroughly document the steps they take to receive a fair market price for the asset. When you set up your trust, you can include the steps you want your trustee to take to complete a sale.

What Happens With the Money Generated From the Sale?

The trustee’s job is to safeguard the assets in the trust and ensure the trust’s productivity in the best interests of the beneficiaries. To ensure the sale remains above board and meets state law requirements, the trustee should have a financial account in the trust’s name. Upon completion of the sale, the profits will go into the account temporarily. The trustee is then responsible for finding ways to reinvest the money that would be profitable for the trust and, therefore, the beneficiaries.

Who Can Help Ensure Your Trustee Can Sell Trust Property According to Your Wishes?

AmeriEstate’s attorneys are here to help you with your estate planning needs. We will ensure your trust terms reflect your wishes and protect your assets and beneficiaries’ best interests. We can help you determine how to handle asset sales and whether a trustee can sell trust property without all beneficiaries approving. Contact us today to learn more about our services.