That’s a common question for those considering a trust as part of their estate plan, and the answer is generally yes, with careful planning and specific provisions within the trust document itself.
What happens to assets in a trust after death?
Typically, a trust functions by holding assets—like real estate, investments, or personal property—for the benefit of designated beneficiaries. Upon the grantor’s (the person creating the trust) death, the assets don’t necessarily stop at what was originally placed within it; instead, the trust can continue to operate according to its terms. This includes the ability to *acquire* new assets, such as real estate. The key is the inclusion of a “power of appointment” or similar clause within the trust document, granting the trustee the authority to purchase and manage additional property. Without this power, the trust is limited to distributing or managing only the assets it held at the time of death. Roughly 55% of Americans don’t have an updated estate plan, leaving assets vulnerable and potentially complicating the transfer of wealth.
How does a successor trustee handle new property?
A successor trustee, appointed within the trust document to manage the trust after the grantor’s death or incapacitation, is responsible for adhering to the trust’s instructions. If the trust document permits acquiring new real estate, the successor trustee can use trust funds – income generated by existing trust assets or principal if the document allows – to purchase property. This could be done to benefit beneficiaries, diversify the trust’s holdings, or fulfill a specific instruction within the trust. The successor trustee has a fiduciary duty to act in the best interests of the beneficiaries, which means careful due diligence and prudent investment decisions are paramount. Many trustees find that consulting with real estate professionals, financial advisors, and legal counsel is crucial for making informed choices. According to the National Association of Realtors, investment in real estate continues to be a popular way to grow wealth, and trusts can be an effective vehicle for managing these investments.
I recall a case with a client named Mr. Henderson, a retired carpenter who built a beautiful beach house and wanted it to remain in the family for generations. He had a trust established, but it hadn’t been updated in over 20 years. After his passing, his daughter, acting as the successor trustee, discovered a fantastic opportunity to purchase the adjacent lot—a prime piece of land that would dramatically increase the property’s value and beachfront access. However, the original trust document did *not* authorize the acquisition of new property. This meant she had to go through a lengthy and costly court process to petition for the authority to make the purchase, delaying the transaction and incurring significant legal fees. It was a frustrating situation that could have been easily avoided with a simple trust amendment.
What if the trust needs funds to buy property?
If the trust lacks sufficient funds to purchase new real estate, the successor trustee may have several options. The trust document might specify how additional funds can be obtained—such as selling existing assets or utilizing income generated by trust holdings. Alternatively, the document may allow the trustee to borrow funds, securing the loan with trust property. It’s also possible for the beneficiaries to contribute additional funds to the trust, provided the trust document permits such contributions. The process requires meticulous record-keeping and transparency to ensure all transactions are compliant with legal and tax regulations. For example, any income generated by the property would be subject to taxation, and the trustee is responsible for accurately reporting this income to the relevant authorities. “Proper planning prevents poor performance” and in the realm of estate planning, this couldn’t be more true.
Fortunately, another client, Mrs. Rodriguez, proactively addressed this issue. She established a revocable living trust and included a provision that allowed the trustee to utilize trust income and a specific line of credit to purchase additional real estate, even after her death. When a small vineyard came up for sale near a property already held in the trust, the successor trustee was able to swiftly secure the purchase, expanding the trust’s assets and providing a valuable income-generating property for the beneficiaries. Mrs. Rodriguez understood the importance of flexibility within her estate plan, and her foresight ensured a smooth and beneficial outcome. She had also designated a “pour-over will” as a safety net, ensuring that any assets acquired *after* the trust was created would automatically be transferred into the trust upon her death, further streamlining the process.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
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Map To Steve Bliss Law in Temecula:
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Feel free to ask Attorney Steve Bliss about: “What should I know about jointly owned property and estate planning?” Or “Can a handwritten will go through probate?” or “How much does it cost to create a living trust? and even: “What happens to lawsuits or judgments against me in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.