Can a Trustee Sell Trust Property Below Market Value in California?
A California trustee generally cannot sell trust property below fair market value without strong justification. The trustee's fiduciary duty, specifically the duty of loyalty and the duty of prudence, requires acting in the best interests of the beneficiaries, which typically means selling at or near fair market value. Accepting a significantly below-market offer, without documented justification, can constitute a breach of fiduciary duty and expose the trustee to personal liability for the shortfall.
Going Deeper
There are circumstances that may justify a below-market sale: the property has significant condition issues that a buyer at full market value would not accept, the market is declining and a quick sale minimizes further loss, or the trust has urgent liquidity needs that outweigh the value of waiting for a higher offer. In any of these cases, the trustee should document the reasoning thoroughly, get a professional appraisal, get an agent's market analysis, and record the decision-making process in writing. The documentation is what protects the trustee if the decision is later challenged.
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