Nine Factors for Preventing CA Trust Litigation over Seller Financing
In many cases, real estate represents a significant portion of the estate of a deceased. This real estate may have been placed into a trust before the decedent’s passing to avoid probate or for other purposes relating to taxes, asset distribution, or long-term care. Regardless of the purpose, once the decedent has passed, the trustee will have to handle the management of the real estate just as he or she would any other asset. When a trustee takes an action concerning such an asset that a beneficiary does not like, this can create the potential for litigation. In today’s difficult mortgage lending environment, what happens if a buyer for the real estate held in trust asks for seller financing as part of the transaction?
A trustee could grant seller financing without risking California trust litigation. Trustees should consider carefully, however, whether or not to pursue this buyer or hold out for another. Factors to be considered include the following:
- Is the real estate held in the trust?
- Is the trustee validly appointed under the terms of the trust?
- Is the power for the trustee to sell real estate granted in the trust?
- Does the trust instrument grant broad powers to the trustee in the handling of real estate?
- Do the beneficiaries of the trust object to the issuance of the installment loan?
- Is the sales price for the house equal to fair market value?
- Does the trustee have a relationship with the buyer of the house outside of this transaction?
- Does the trust instrument instruct the house to be sold?
- What is the financial burden on the trust to wait for another buyer of the property?
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