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My sister passed away and she had put her home in a trust of which I am the trustee. She had specified that the proceeds of her estate be divided in 4 equal parts — three for individuals, including me, and one to several non-profits.

She still owes a mortgage of about 300,000 on a home that is appraised at about 1,300,000.

My questions are:

  1. If I could come up with the money, could I offer to buy out the other 2 parties?
  2. How would the non-profits be treated? Would they all need to have a quit claim?
  3. Could I keep her original mortgage, or would I need to pay it off first in order to execute a buyout —
    i.e. keep the 300K mortgage at her low interest rate, but then take a second and use some of my savings to pay the other shareholders?
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  • 2
    (1) How big is her estate? (2) All that ultimately matters is the monetary value of the estate. (3) The bank still needs to be paid.
    – RonJohn
    Commented Nov 20, 2023 at 6:05
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    (2) unless the house was explicitly willed to a particular recipient. In which case you let them take ownership and negotiate from there. But it sounds like that case doesn't apply here.
    – keshlam
    Commented Nov 20, 2023 at 8:25
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    Where in the world are you? The details of things like inheritance tax, mortgage regulations etc vary by country and even state.
    – Vicky
    Commented Nov 20, 2023 at 9:35
  • Is it not clear that whatever else, switching anything among the beneficiaries should have no effect on the mortgage?
    – Robbie Goodwin
    Commented Nov 20, 2023 at 20:39
  • Hmm, Asset value $1,300,000 - $300,000 divided 4 ways or $250,000 per. Get new loan for $750,000 + $300,000 and payoff balance and 2 other beneficiaries and charities. Offer same to other 2 beneficiaries. If more than 1 of the 3 beneficiaries wants it, go with highest bidder.
    – chux
    Commented Nov 21, 2023 at 5:57

1 Answer 1

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It's a question to an estate attorney. The whole point of trusts is to avoid probate, which includes these kinds of issues. The property is owned by the trust, and as the trustee your job and legal duty is to follow the instructions.

You might be able to buy the property from the trust, but you'll need to discuss with an attorney how to do that without breaching your fiduciary duty.

It's highly unlikely that you can assume the mortgage.

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    I would expect that all other parties would need to agree to the price. An appraisal is an estimate and not a market price.
    – JimmyJames
    Commented Nov 20, 2023 at 19:57
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    No, I don't think that's a requirement. The beneficiaries can claim a breach of the fiduciary duty and demand compensation for damages, but trustees do not require beneficiaries' agreement to act.
    – littleadv
    Commented Nov 20, 2023 at 21:03

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