Question: I am a Trustee for a trust which holds real estate. The trust was established by our parents. My siblings and I disagree as to whether the real estate should be sold. How can I protect myself? Answer: Trustees face difficult challenges in managing the expectations of the beneficiaries (who generally want to know “when am I getting my money” and “how much am I getting”).
The investment standards for fiduciaries such as Trustees generally involve a standard of ‘prudence’. In the case of real estate, the duty requires the trustee to secure the fair market value of the property and to employ that degree of care, skill and judgment that a reasonably prudent person would exercise in the conduct of a similar sale (this is a quote from a Maryland Court of Special Appeals decision related to this issue). Out of the same court decision referenced above, the Court reviewed these factors when determining the prudence of a trustee’s decision to sell real property: 1. Efforts to determine the value of the property; 2. Methodology in offering the property for sale; 3. Efforts to obtain the best offer before closing a sale. Comment: It is easy for trust beneficiaries to play Monday morning quarterback as to the Trustee’s decisions. Clearly the exercise of ‘prudence’ is a matter of judgment. For example, in one Court of Special Appeals decision, the court actually held that there was a breach of duty by the Trustee because of the length of time that the property was on the market with no sale.
The good news for any Trustee is that prudence is made up of business judgments and generally results alone should not be able to determine whether or not a trustee has violated the duty of prudence and care.
If you have any questions or would like more information please contact Steve Shane at: firstname.lastname@example.org | 301.575.0313.
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.