Personal Finance: Ask the Experts

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

June 7, 2013
Can a trustee purchase property that belongs to the trust?

My mom is living in a board and care. Her home is in a revocable trust and I am the Successor Trustee. I am also agent under her Power of Attorney. She can no longer make any financial decisions, as verified by her internist and neurologist. She will be in a board and care from now on. Her only asset is her home. As the Successor Trustee and agent under the Power of Attorney, I have the authority to sell her home without her signature to another buyer and to sign the paperwork. Can I purchase her home? She needs the money to pay for the board-and-care. She can't deed the house to me because I have to wait one year to sell and she will be out of money before then. Is my only option to sell her home to another buyer, or can I purchase the home?

A: I can certainly appreciate your wanting to purchase your mother's home rather than selling it to a third party. It certainly seems to be the most sensible solution.

Because the house is titled in the revocable trust, you would be selling it in your capacity as the trustee. Whether you, as an individual, are able to purchase the home, rather than sell it to a third party, may be allowed under the terms of the trust. In general, a trustee is not allowed to purchase property from the trust because this could be considered an act of "self-dealing" and a breach of the trustee's duty of loyalty to the current beneficiary (in your case, your mom) and the future beneficiaries (in your case, whomever receives the assets of the trust after your mom's death). The trustee's powers are generally set forth in the trust in a section usually entitled "Power of Trustee" or "Trustee's Powers." Your mother's trust might state that the trustee is given the power to purchase trust property, so long as the purchase is at fair market value, or some other similar condition.

If the trust contains no such power, it is possible that the power of attorney gives you authority, as your mother's agent, to amend the administrative portions of the trust. Using that authority, you could amend the trust to expand the trustee's powers to allow the trustee to purchase property from the trust under conditions which would ensure that the transaction is fair to the trust's current and future beneficiaries.

A strong word of caution about your situation: Any transaction in which the trustee is involved that could be considered a breach of the trustee's duty of loyalty to the beneficiaries is carefully scrutinized, especially by the beneficiaries. What seems fair to you may be considered unfair to others. I have seen many a family dispute over similar issues and it is not because either party is "wrong." Rather, it is because each looks at it from a different perspective.

Given the rather complex nature of your dilemma, I would recommend that you seek legal counsel to review your trust and power of attorney and devise a plan that would carry out your goal and also ensure that you are properly carrying out your fiduciary obligations to the trust's beneficiaries. I am not trying to push you into seeking the guidance of an attorney unnecessarily. Rather, I have found there is a common misconception that, if one has a trust, the services of an attorney are no longer required. Many a trustee has found himself or herself on the receiving end of litigation because of the belief that, "There is a trust so I can do this on my own." Sometimes that is absolutely correct and no one should ever spend legal fees when it is not necessary. But when one is a trustee, one holds a fiduciary responsibility and with that comes potential liability. There is a risk with being a trustee and proceeding in a prudent fashion is advice well taken.

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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 cbuck@sacbee.com

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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