This issue often arises in California in many different contexts including:
This is the second post of a 2-part post series. In the we provided you with rules and information. In this second post we demonstrate how those rules apply to a set of real-world facts.
Here’s how it often arises:
Rusty trustee could find himself in trouble in these facts. He could be violating his duties to preserve property of the trust estate and to make that property productive. A court could order him to pay $108,000.00 of his personal funds into the trust as a surcharge to replace the lost rent. That’s $3000.00 per month times 36 months.
Most likely the surcharge would not be for that maximum amount. It would be reasonable for Rusty to wait a few months after Mom went to the skilled nursing facility before Rusty determines whether to keep the house available for Mom or to rent it or sell it and invest the net sale proceeds. It may be reasonable to wait and make sure that Mom will not return to living in the family house. Then it would take time to clean out the house and rent it or sell it.
Rusty trustee essentially still has the same problem if Dad and Mom had both died at the same time and Rusty allowed the family house to remain vacant and unrented for 36 months.
Remember that in that situation the trust provides for all assets to go to Rusty, Tina, and Scooter equally.
Rusty trustee could be liable to each of Tina and Scooter in the amount of $36,000. The fair market rental value of the family house is $3000.00 per month. Thus, each month that Rusty does not receive any rent for the family house is essentially the same as him taking $1000.00 from the pocket of each of Tina and Scooter.
You may have noticed that only Rusty and Tina chipped in to pay many of Mom’s expenses. Were you wondering about Scooter?
Scooter didn’t chip in because he never has any money. In fact, he’s 50 years old, and he’s always lived in the family house with his parents rent free.
Rusty trustee is taking a risk if he allows Scooter to continue living in the family house rent free, especially after the death of Mom. Rusty could be violating his duty to treat all trust beneficiaries impartially.
Rusty may need to evict Scooter from the family home. That is the difficult reality in some of these cases.
If Scooter lived rent-free in the family house after the death of both Dad and Mom, then Rusty trustee may be able to offset the amount that Scooter inherits from the trust by the reasonable value to Scooter of him living rent-free in the family house since that time.
The vacant house dilemma is only 1 of many things that can get the trustee of a trust, the conservator of a conservatorship court proceeding, and the administrator or executor of a probate decedent’s estate court proceeding into trouble. Don’t risk personal liability by making this type of mistake.
Hiring an attorney experienced with trusts, conservatorship court proceedings, and probate decedent’s estate court proceedings can keep you out of trouble.
At Meinzer Law Firm, P.C., we have over 20 years of experience helping clients achieve their goals in trust cases, conservatorship court proceedings, and probate decedent’s estate court proceedings. Contact Meinzer Law Firm, P.C., in Torrance to assist you.