Kay Brooks

Ask the Experts: Trustee can act without her sisters' consent

Published: Wednesday, Oct. 31, 2012 - 12:00 am | Page 7B

What happens when siblings don't agree on dividing up their parents' estate?

That issue is addressed this week by Sacramento estate planning attorney Kay Brooks, part of our online "Ask the Experts" panel.

To see more advice from her and our other local experts on taxes, investing or personal finances, go to: www.sacbee.com/personal financeblog.

My parents passed away in December 2011 and July 2012. My two sisters and I are to divide everything equally, according to their 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, which was recently assessed and 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 come out of the trust? Does it 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 since my dad died. Do we get a grace period before we have to decide? My sister, the trustee, says we need to decide by Nov. 1, which seems too soon, as we are still grieving our parents.

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 administer the trust. Unless the trust says otherwise, she is not required to get your consent before making decisions regarding trust assets.

Further, if the 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, the price will likely be determined by the fair market value. However, if there is disagreement about the home's appraised value, you may have to negotiate a price.

If you and Sister B buy out Sister A's interest, there may be property tax consequences. 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, but the transfer must be done in a very specific fashion. I recommend that you consult with an experienced estate planning attorney to ensure the sale is done correctly.

As for remaining assets, although there is no firm deadline for distribution, a trustee cannot keep a trust administration going indefinitely unless the trust permits it.

Also, there are costs to keeping a trust going, including the expense of yearly tax returns, required accountings to beneficiaries and compensation to the trustee.

– Compiled by Claudia Buck

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