Los Angeles Probate Sirkin Law

When a couple creates a revocable trust with an A/B designation, when the first spouse passes away, the remaining spouse usually remains as trustee. While in most cases, this works out well, there are times when becoming the trustee of two trusts can be problematic. Lets say you are the beneficiary of one trust, and there are also beneficiaries of the other trusts, where you are a trustee. Conflicts of interest can lurk out there without you knowing it, which can pose issues for you as a trustee.

When to avoid becoming a trustee of two trusts?

Lets say you are a surviving wife in an A/B Trust situation, and your deceased husband left gifts of specific property to his children from his first marriage. Years go by, you complete the allocation, and then you decide that you want to sell one of the properties which were specifically designated as a specific gift. Because, now, you are a trustee, you must notify the beneficiaries of the B Trust that you propose or plan to sell that property.

When you want to benefit from the trust, but are the trustee, you should not act as a trustee. This may seem difficult if you are a trustor, but it may protect you from lawsuits by beneficiaries, especially those from other marriages. Remember that children of the first marriage, generally do not have any mercy for the second wife or husband.

But more importantly, you may have a conflict of interest, if you try to sell the property to yourself if you don’t meet certain requirements. Your sale must be fair and reasonable to the beneficiaries.

As a trustee, if you want to sell the property to yourself, you must insure that the sale is fair and reasonable to the beneficiaries. You cannot benefit from the transaction. This means, you as a trustee cannot personally benefit from it. This type of transaction is a slippery slope and are generally advised against. In addition, you must give notice of all important or material facts about the terms of the sale to the beneficiaries. For example, if the property has a foundation defect, and you which to be credited for it, you must disclose the defect to the beneficiaries, and to tell them how much, if any credit you seek.

If you are a trustee in Woodland Hills, or a trustee in Los Angeles and are contemplating selling a specific property, or have questions about your dual role as a trustee, feel free call us to consult with a resourceful trust attorney to help you meet the above fairness and disclosure requirements.

By: Mina Sirkin, Trust attorney in Woodland Hills, Los Angeles County, California who is a Board Certified Specialist expert in Estate Planning and Trust Law, whose expertise is to advise trustees about their roles under California trust law. Call 818.340.4479