Can trustees sell major assets without informing beneficiaries?

Beneficiaries of a trust may sometimes enjoy access to and use of trust property. Other times, they may receive funds distributed by the trustee after the sale of trust resources.

A trustee generally has a fiduciary duty to act in the best interests of trust beneficiaries. Typically, they should comply with all relevant laws and the instructions included in the trust documents. They also need to make a reasonable effort to maintain or even increase the value of trust assets.

Selling trust property for well below the fair market value of those assets could deprive beneficiaries of the full value of the trust. Should beneficiaries receive notice in advance before major sale transactions that could affect the duration or value of trust distributions?

Advance notice is typically necessary

Trustees must make regular financial disclosures to beneficiaries. They should provide an annual accounting that explains any fluctuations in the value of trust resources and any major distributions or sales that occurred.

In scenarios where they intend to liquidate major assets, ranging from real property and investments to businesses, they typically need to provide advanced notice to beneficiaries. Doing so gives the beneficiaries the potential opportunity to acquire those resources personally. They also theoretically have the option of contesting the sale and questioning the necessity of the transaction or the value set for the assets.

The courts can potentially intervene to prevent a sale that deprives beneficiaries of the full value of the trust. People could also seek the removal of a trustee in cases where they mishandled key resources.

Reviewing all financial disclosures during trust administration with a skilled legal team can help beneficiaries recognize when they need to take legal action. When a trustee undervalues assets or conducts sales without making appropriate disclosures first, beneficiaries may have grounds to take legal action.