Can a Trustee Sell Property in Miami, Florida?

Yes, in most cases a trustee can sell real property held in a trust in Florida. The power to sell trust property is one of the fundamental powers granted to trustees under the Florida Trust Code, but it is not unlimited. The trustee must act within the scope of their authority as defined by the trust instrument and Florida law, and must comply with their fiduciary duties when conducting any sale. At the Law Offices of Albert Goodwin, PA, we advise trustees and beneficiaries on the legal requirements for selling trust property in Florida and represent clients when disputes arise over trust property sales.

The Trustee's Power to Sell Under the Florida Trust Code

Florida Statutes § 736.0816 enumerates the specific powers of a trustee, and these powers are broad. Under § 736.0816(1), a trustee may collect trust property and accept or reject additions to trust property from a settlor or any other person. Under § 736.0816(2), a trustee may acquire or sell property, for cash or on credit, at public or private sale. This statutory power applies to all types of trust property, including real estate, personal property, financial assets, and business interests.

However, the trust instrument itself may expand, restrict, or eliminate the trustee's power to sell property. Under F.S. § 736.0815, a trustee may exercise the powers conferred by the trust terms, and except as limited by the trust terms, the powers conferred by the Florida Trust Code. This means that if the trust document contains a specific provision prohibiting the sale of a particular property, such as the family home, the trustee generally must comply with that restriction. Conversely, if the trust grants the trustee broad powers to manage and dispose of trust property, those powers supplement the default statutory powers.

When Must a Trustee Sell Property?

In certain circumstances, a trustee may not merely have the power to sell property but may actually have a duty to sell. The duty to sell can arise from several sources:

Trust terms requiring sale. Some trusts include provisions directing the trustee to sell specific property upon the settlor's death or upon the occurrence of a particular event. If the trust terms require a sale, the trustee must comply unless obtaining court authorization to deviate from the terms.

Duty to diversify. Under the Prudent Investor Rule codified in F.S. § 736.0903, a trustee must diversify the investments of the trust unless the trustee reasonably determines that the purposes of the trust are better served without diversification. If a trust's assets consist primarily or entirely of a single piece of real property, the trustee may have a duty to sell the property and reinvest the proceeds in a diversified portfolio. Failure to diversify can expose the trustee to liability for any decline in the property's value.

Need to pay debts, expenses, or taxes. If the trust must pay debts of the settlor, administrative expenses, or taxes, and there is insufficient cash in the trust to cover these obligations, the trustee may need to sell real property to raise the necessary funds.

Property that is a burden on the trust. If a property is costing the trust more in maintenance, insurance, property taxes, and repairs than it is generating in income or appreciation, the trustee may have a duty to sell the property to prevent further erosion of the trust estate.

The Duty to Obtain Fair Value

When a trustee sells trust property, the trustee has a fiduciary obligation to obtain a fair price. This duty flows from the trustee's general duty of loyalty under F.S. § 736.0802 and the duty to administer the trust in good faith under F.S. § 736.0801. A trustee who sells trust property for less than its fair market value may be liable to the beneficiaries for the difference between the sale price and the property's actual value.

Practical steps a trustee should take to demonstrate compliance with this duty include:

Obtaining a professional appraisal. Before listing real property for sale, the trustee should obtain an independent appraisal from a licensed appraiser. The appraisal establishes a baseline fair market value and provides documentation that the trustee used reasonable methods to determine the property's worth.

Listing the property on the open market. Selling the property through a licensed real estate broker on the open market, with adequate exposure to potential buyers, helps ensure that the trustee receives a competitive price. A private sale to an insider or a sale conducted without market exposure may be scrutinized by the court and challenged by beneficiaries.

Avoiding self-dealing. Under no circumstances should the trustee purchase the trust property for themselves or sell it to a family member, business associate, or other related party without full disclosure to all beneficiaries and, ideally, court approval. Self-dealing transactions are voidable under F.S. § 736.0802(2), and even if the price is fair, the transaction may be set aside by a court.

Documenting the sale process. The trustee should maintain records of all steps taken in the sale process, including the appraisal, listing agreement, marketing efforts, offers received, negotiations, and the final closing documents. This documentation protects the trustee in the event of a later challenge by beneficiaries.

Notice to Beneficiaries

While the Florida Trust Code does not impose a specific statutory requirement that a trustee provide advance notice to beneficiaries before every sale of trust property, the trustee's duty to keep qualified beneficiaries reasonably informed under F.S. § 736.0813 effectively requires communication about significant transactions, including the sale of real property.

As a matter of best practice and to minimize the risk of disputes, a trustee should notify all qualified beneficiaries in advance of a proposed sale of significant trust property, provide information about the property's appraised value, the proposed sale terms, and the reasons for the sale, and give beneficiaries a reasonable opportunity to raise objections or concerns before the sale is completed.

Providing advance notice serves multiple purposes. It fulfills the trustee's duty of transparency, allows beneficiaries to voice concerns about the timing or terms of the sale, and reduces the likelihood that a beneficiary will later challenge the sale as a breach of trust. If the trust instrument itself requires notice before the sale of property, the trustee must strictly comply with those requirements.

What If a Beneficiary Objects to the Sale?

A beneficiary's objection does not automatically prevent the trustee from selling trust property. The trustee has the authority and often the duty to make decisions about the management and disposition of trust assets, and a single beneficiary's disagreement does not override that authority. However, beneficiary objections should not be dismissed lightly.

If a beneficiary objects to a proposed sale, the trustee should consider the following:

Evaluate the objection. Is the objection based on legitimate concerns about the sale price, timing, or terms? Or is it based on emotional attachment to the property? While emotional attachment is understandable, particularly with family homes, it does not change the trustee's fiduciary obligation to manage the trust prudently.

Seek court approval. If a sale is likely to be contested, the trustee may petition the court for instructions under F.S. § 736.0201. A court order approving the sale provides the trustee with protection against later claims that the sale was improper. The cost of obtaining a court order is a legitimate trust administration expense.

Consider alternatives. In some cases, it may be possible to address a beneficiary's concerns through alternative arrangements. For example, if a beneficiary wants to keep a family home, the beneficiary may be able to purchase the property from the trust at fair market value, or the trust terms may allow the trustee to distribute the property in kind to the beneficiary as part of their share of the trust estate.

Selling Property in an Irrevocable Trust vs. a Revocable Trust

The rules governing the sale of trust property apply to both revocable and irrevocable trusts, but there are important practical differences.

During the settlor's lifetime, a revocable trust is fully controlled by the settlor, who typically serves as the initial trustee. The settlor-trustee can sell any trust property freely, just as they could if they owned the property in their individual name. No notice to beneficiaries is required because the trust is revocable and the settlor retains complete control.

After the settlor's death, or in the case of an irrevocable trust, the trustee's power to sell is subject to the full range of fiduciary duties described above. The trustee must act in the beneficiaries' interests, obtain fair value, and communicate with beneficiaries about significant transactions.

Title and Conveyance Issues

When a trustee sells real property in Florida, the deed is executed by the trustee in their capacity as trustee. The deed typically identifies the grantor as "[Trustee Name], as Trustee of the [Trust Name], dated [date]." Title insurance companies and buyers' attorneys will generally require documentation confirming the trustee's authority to sell, which may include a copy of the trust instrument (or relevant excerpts), a trustee's certificate under F.S. § 736.1017, or a court order authorizing the sale.

A trustee's certificate is a useful tool that allows the trustee to provide third parties with essential information about the trust and the trustee's authority without disclosing the full terms of the trust. Under F.S. § 736.1017, a person who acts in reliance on a trustee's certification is protected as though the certification were accurate, which provides comfort to buyers and title companies in real estate transactions.

Contact a Florida Trust Property Attorney

Whether you are a trustee considering the sale of trust property or a beneficiary who has concerns about a proposed or completed sale, legal guidance is essential. The Law Offices of Albert Goodwin, PA is located at 121 Alhambra Plz #1000, Coral Gables, FL 33134. We represent trustees and beneficiaries in all aspects of trust administration and trust disputes in South Florida. Call us at 786-522-1411 or email [email protected] to schedule a consultation.