When property is put in a trust, the legal ownership changes so the trustee can manage it under the trust’s rules. After the person who created the trust passes away, the successor trustee steps in to handle and eventually distribute the property to the beneficiaries.
If you are a beneficiary, you probably want to know what happens next. When a house, bank account, or other asset is in the trust, the trustee does not get to treat it as their own property.
At The Grossman Law Firm, Attorney Scott Grossman represents beneficiaries across California when there are disputes about how a trustee manages, sells, or distributes trust property.
Key Takeaways
- Putting property in a trust changes who holds legal title and who manages the property.
- The trustee manages trust property in accordance with the trust’s terms and California law.
- Just because a trustee controls trust property does not mean they can use it as if it belongs to them.
- After the settlor dies, beneficiaries may have rights to information, accountings, and distributions from the trust.
- If a trustee misuses, hides, or improperly transfers trust property, beneficiaries may have grounds to take legal action.
What Happens When Property Is Put in a Trust?
Property placed in a trust becomes subject to the terms of that trust.
Trust property can include many different types of assets, such as:
- Real estate
- Bank accounts
- Investments
- Business interests
- Vehicles
- Personal property
For real estate, putting the property in a trust generally involves changing title so that the property is held in the name of the trustee in their capacity as trustee.
This distinction becomes especially important after the owner dies. Property properly held in a living trust generally does not need to pass through the formal probate process before reaching the trust beneficiaries. Instead, the successor trustee administers the property under the trust’s terms.
Who Controls Property in a Trust?
The Trustee Manages the Property for the Beneficiaries
The trustee is in charge of trust property, but that does not give them free rein to do whatever they want.
A California trustee has fiduciary duties to the beneficiaries. The trustee must follow the trust’s terms, administer the trust for the beneficiaries, protect trust property, and avoid using trust assets for personal benefit.
Depending on the terms of the trust, the trustee may need to maintain property, manage investments, pay legitimate trust expenses, sell assets, or make distributions.
With control comes responsibility. The trustee must follow the law and the trust’s instructions.
What Must a Trustee Do With Trust Property?
After the settlor dies, a successor trustee generally needs to identify and protect the trust’s assets and then administer them in accordance with the trust document.
Beneficiaries Have a Right to Ask Questions
Problems can arise when beneficiaries cannot determine what happened to trust property.
For example, you may discover that your parent’s home belonged to the trust but the trustee sold it without explaining where the proceeds went. Or an investment account that you expected to see in the trust may suddenly be missing.
Those situations deserve a closer look.
A trustee generally must keep appropriate records and provide beneficiaries with information concerning the trust’s administration. Depending on the circumstances, beneficiaries may also have the right to receive a trust accounting.
What If the Trustee Misuses Trust Property?
Trustee control over property is not unlimited.
If a trustee transfers trust property to themselves, sells an asset for less than its value to benefit someone else, hides assets, refuses to make required distributions, or otherwise mismanages the trust, beneficiaries may be able to petition the California probate court for relief under Probate Code § 17200.
Depending on what happened, a beneficiary may seek remedies that include:
- Requiring the trustee to provide an accounting
- Recovering improperly transferred trust property
- Holding the trustee responsible for financial losses
- Removing and replacing the trustee
- Obtaining other relief available under California law
Not every disagreement means the trustee has breached a fiduciary duty. But if trust property is missing or the trustee cannot explain what happened to it, you do not have to accept the trustee’s explanation.
If you believe a trustee is mishandling property that should ultimately benefit you, The Grossman Law Firm can evaluate your situation and help you understand your legal options.
FAQ
Does putting a house in a trust mean the trustee owns it?
The trustee holds legal title in their capacity as trustee and manages the property under the trust’s terms. That does not make the house the trustee’s personal property.
Does property in a trust go through probate in California?
Property held in a living trust can generally pass to beneficiaries without going through formal probate. Whether a particular asset belongs to the trust depends on how the property was owned and titled.
Can a trustee sell property that is in a trust?
Often, yes, depending on the terms of the trust and the circumstances. However, trustees must comply with their fiduciary duties when selling trust property and properly account for what happens to the proceeds.
What can I do if trust property is missing?
If you believe trust property is missing, improperly transferred, or being used for the trustee’s personal benefit, you may have legal options. A California trust litigation attorney can review the trust and available financial records to determine what steps may be appropriate.
Related Resources
- Overview of California Trust Litigation
- Can a Trustee Sell a House Without Beneficiary Approval?
- What Happens If a Trustee Refuses to Distribute Trust Assets?
- Beneficiary Rights in California
- Trustee’s Duty: What is the Prudent Investor Rule?
- How to Get Your Trustee to Distribute Your Inheritance?
- Know What You’re Getting Into: The Timeline of a Trust and Estate Lawsuit
- Can You Remove a Trustee for Mishandling Assets?
- Can’t Afford a Probate or Trust Attorney?
How The Grossman Law Firm Can Help
You might not have been involved when the property was first put in the trust. As a beneficiary, though, you have a right to make sure the trustee manages and distributes those assets properly.
If property is missing, the trustee will not explain a sale or transfer, or you think someone is using trust assets for themselves, it is time to look into it.
At The Grossman Law Firm, we help beneficiaries and heirs throughout California enforce their rights in probate and trust litigation.
Call (888) 443-6590 or complete our Get Help Now form to discuss your situation.
Our Intake Specialists can evaluate your case at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published: Dec 7, 2023