Can a Trustee Sell Property in a Trust?

Yes, in many situations a trustee can sell property held in a trust, but the ability to do so is not automatic. Whether a trustee has the authority to sell trust property depends on the language of the trust agreement, the type of trust involved, and the trustee's fiduciary obligations under state law.

This question most commonly arises when a trust owns real estate and the trustee needs to sell the property to distribute assets, pay expenses, reinvest funds, or manage
the trust more efficiently. It is also a frequent issue after the death of a grantor, when beneficiaries may disagree about whether a property should be sold or retained.

Because trustees can be held personally liable for improper actions, it is critical to understand the rules before listing or selling any property owned by a trust.

Where Does a Trustee Get the Authority to Sell Property?

The primary source of a trustee's authority is the trust document itself. Most properly drafted trusts include specific provisions granting the trustee the power to sell, convey, lease, mortgage, or otherwise manage trust assets, including real estate.

If the trust expressly authorizes the trustee to sell property, the trustee generally may do so without court approval and without obtaining consent from the
beneficiaries. The trustee must still comply with fiduciary duties, but the authority to act is clearly established.

If the trust document is silent or ambiguous, state law may provide default powers. In New York, trustees are granted broad statutory powers under Estates, Powers and
Trusts Law (EPTL) § 11-1.1, which allows trustees to sell, exchange, or otherwise dispose of trust property. However, these powers must always be exercised in good faith, for proper purposes, and in the best interests of the beneficiaries.

When trust language is unclear, or when beneficiaries object to a proposed sale, the trustee may need court approval before proceeding. Selling property without proper
authority can expose the trustee to claims for breach of fiduciary duty.

Does the Type of Trust Matter?

Yes. The type of trust has a major impact on a trustee's ability to sell property.

Revocable Living Trusts

With a revocable living trust, the trustee typically has broad authority to sell property while the grantor is alive and
competent. In many cases, the grantor is also serving as trustee, which makes the sale functionally no different than selling personally owned property.

After the grantor's death, the successor trustee's authority depends on the trust's terms and the purpose of the trust at that stage. Most revocable trusts become
irrevocable upon the grantor's death, and the successor trustee must follow the distribution and management instructions in the trust document.

Irrevocable Trusts

With an irrevocable trust, the trustee's authority is more limited. Although many irrevocable trusts still allow the sale of trust property, the sale must further the
specific purpose of the trust.

For example, an irrevocable trust created for asset protection or Medicaid planning may permit sales, but only if the proceeds remain inside the trust and are not
distributed improperly.

Trustees of Medicaid asset protection trusts must be especially careful. While selling property is often allowed, mishandling the proceeds can jeopardize Medicaid
eligibility and undo years of planning.

Does a Trustee Need Permission From Beneficiaries to Sell Property?

In most cases, a trustee does not need beneficiary permission to sell trust property. Trustees are appointed to manage trust assets independently, and beneficiaries
generally do not have veto power unless the trust explicitly requires their consent.

That said, trustees owe beneficiaries a fiduciary duty. This includes the duties of:

• Loyalty — Act solely in the interest of beneficiaries, not yourself
• Prudence — Manage assets as a reasonable person would
• Impartiality — Treat all beneficiaries fairly

The trustee must sell the property for fair market value, avoid conflicts of interest, and act in the best interests of all beneficiaries, not just one.

If beneficiaries believe a trustee sold property improperly, for too little money, or for personal benefit, they may challenge the sale in court. Because of this risk,
prudent trustees often:

• Obtain professional appraisals before listing
• Document their reasoning for the sale
• Communicate with beneficiaries even when consent is not legally required
• Keep detailed records of the sale process

Can a Trustee Sell Trust Property to Themselves or a Family Member?

Generally, no. A trustee selling trust property to themselves or to a related party is considered self-dealing and is usually prohibited.

Self-dealing is one of the most serious breaches of fiduciary duty. Under New York law, self-dealing transactions are presumptively voidable, meaning beneficiaries can
have the sale set aside regardless of whether the price was fair.

Unless the trust document expressly allows it or a court approves the transaction, such sales can result in:

• The trustee being removed from their position
• An order to return the property or disgorge profits
• Personal liability for damages to the trust
• Liability for the beneficiaries' legal fees

Even when a trust allows self-dealing, the transaction must be handled carefully, at fair market value, and with full disclosure. Trustees should never assume these
transactions are permissible without legal guidance.

What Happens to the Proceeds After the Sale?

When trust property is sold, the proceeds remain trust assets. The trustee must deposit the funds into a trust account and manage them in accordance with the trust's
terms.

For revocable trusts, proceeds may eventually be distributed to beneficiaries or used to pay expenses. For irrevocable trusts, distributions may be restricted or
prohibited, depending on the trust's purpose.

Improper distribution of sale proceeds is one of the most common trustee mistakes and frequently leads to:

• Litigation from beneficiaries
• Tax complications
• Loss of asset protection benefits
• Personal liability for the trustee

What If the Trust Owns Property in Another State?

A trust can own property in multiple states, and a trustee can usually sell out-of-state property. However, the sale must comply with the laws of the state where the
property is located.

This often requires coordination with a local attorney to ensure:

• Proper deed preparation and execution
• Correct recording with the county
• Compliance with state-specific real estate disclosure rules
• Proper handling of transfer taxes or documentary stamps

Failure to handle this correctly can delay or invalidate the transaction.

New York Trustee Powers and Requirements

New York provides specific guidance for trustees through the Estates, Powers and Trusts Law:

Trustees must also comply with the Prudent Investor Act (EPTL § 11-2.3), which requires trustees to invest and manage trust assets as a prudent investor would, considering the purposes, terms, and circumstances of the trust.

When Should a Trustee Speak With an Attorney?

A trustee should consult an attorney before selling trust property if:

• The trust language is unclear or does not explicitly grant sale authority
• The trust is irrevocable
• The sale involves a family member or related party
• Beneficiaries are disputing the transaction
• The trust was created for Medicaid or asset protection purposes
• The property is located in another state
• The trustee is unsure about their fiduciary obligations

How Zeus Estate Planning Can Help

If you are serving as a trustee or are a beneficiary of a trust that owns real estate, speaking with an experienced trust and estate planning attorney before a sale can
help protect you from costly mistakes and personal liability.

At Zeus Estate Planning, we help trustees understand their powers and duties, navigate complex trust administration issues, and handle property sales in compliance with
New York law. We also help beneficiaries protect their interests when they have concerns about how a trustee is managing trust assets.

Schedule a free consultation to discuss your trust administration needs with our New York estate planning attorneys.