Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

October 9, 2012
Can we buy out our sister's share of Mom and Dad's house?

Q: My parents passed away recently, in December 2011 and July 29, 2012. There are three daughters; my two sisters and I are to divide everything equally, according to the living trust. Our middle sister is the trustee.

Much to our surprise she wants to make all the decisions without our consent. She insists that we sell the house on 2 1/2 acres. The attorneys had us have the house assessed and it is well below what we thought it was worth. My other sister and I would like to rent it out until the market is up. I know we can buy her out, but what determines the price?

Does the house then come out of the trust? Does that involve a lot of legal problems? My parents also owned property in Nevada. Would we be better off just liquidating everything as opposed to waiting for a better market?

It has been two months to the day that my dad died. Do we get a grace period before we have to decide? My sister, the trustee, says we have to decide by November 1, which seems too soon, as we are still grieving our parents. Thank you for any consideration you can give. -- Linda, Rocklin, CA

A: I'm sorry for your loss. It's especially tough after the deaths of both parents when siblings want different things.

As trustee of your parents' trust, your sister (Sister A) has a duty to act with care and loyalty. She cannot administer the trust in a way that favors herself and disfavors you and your other sister (Sister B).

However, the trustee also has the exclusive right to handle the trust administration. Unless the trust says otherwise, she is not required to get your consent before making decisions regarding trust assets.

Further, if the trust assets are to be distributed outright in equal thirds to each sister, the trustee cannot keep the house in the trust indefinitely. She must either sell the house and distribute the proceeds, or give each of you a one-third interest in the house.

If you and Sister B want to keep the house, you can discuss with Sister A the option of buying out her interest. If she agrees to this, the price will likely be determined by the fair market value of the house. However, if there is disagreement about the appraised value of the house, you may have to negotiate a price.

If you and Sister B buy out Sister A's interest, there may be property tax consequences to this transfer. Transfers from parents to children are exempt from property tax reassessment under certain conditions, but transfers between siblings are not.

The transaction may be structured to avoid or minimize reassessment of the property, but the transfer must be done in a very specific fashion. I recommend that you consult with an experienced estate planning attorney if you and Sister B buy out Sister A's interest so that the sale is done correctly.

As for the remaining trust assets, although there is no firm deadline for distribution, the trustee cannot keep the trust administration going indefinitely unless the trust permits it. Also, there are annual accounting requirements for trusts in California. Trusts must file yearly tax returns, and the trustee is entitled to compensation from the trust, so there are expenses associated with keeping a trust going.

The trustee should act in a reasonably timely fashion. She may want to list and attempt to sell the house before year end to avoid changes in income tax laws expected for 2013. As trustee, she is within her rights to ask you and your other sister to decide your wishes by a certain date.

If you are concerned that your Sister A is not handling her duties as trustee properly, you can consult with an attorney experienced in trust administration. He or she can explain a trustee's role and duties in detail, and help determine if your interests as beneficiaries are being adequately represented in the process.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.

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