Trustees Don’t Live for Free
Oct 27, 2022
stefanSo a question I’m frequently asked by my clients who are suing to remove a trustee from the office of the trustee is, “Well, while the trustee is in office, can they live in a trust-owned real property for free, not pay rent, not pay utilities, not pay the cost of the upkeep of the property?” And again, the answer is very much dependent on what the trust says.
You know, if the trust says that the trustee is entitled to live in the property without paying rent, without paying utilities, without paying the cost of upkeep, then yes, they can do so. There’s nothing my client or any of the other trust beneficiaries can do about that fact. If the trust is silent, however, it’s not acceptable for the trustee to simply assume that they can live in the trust’s own-able property without paying rent or any of the other costs required to upkeep the home. In fact, their choosing to do so without authority is a breach of their fiduciary duties to the trust and to the other trust beneficiaries.
The probate code is very clear that trustees of trusts that own real property or any property for that matter, have a fiduciary duty to the trust and to the trust beneficiaries to make that property productive. So in the terms of property that can be rented out, that property needs to generate income, it needs to generate fair market rent. The person living in that property needs to pay for the utilities and needs to pay for the cost of upkeep. It is not appropriate to just assume that the trust will do so. And in fact, in many cases where trustees who are also trust beneficiaries decide to live in these trust properties for free are setting themselves up for a removal petition based exclusively on the fact that they are in breach of their fiduciary duties to the trust and to the trust beneficiaries.
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