Trusts can maximize the positive impact of an inheritance, preserve resources and help to ensure that beneficiaries can retain key benefits. Trustees assume responsibility for managing trust resources and making appropriate distributions as necessary.
Frequently, that process requires the liquidation of assets to generate liquid capital for financial distributions. A trustee’s duty to beneficiaries requires that they accurately value key resources before liquidating them to make distributions.
Undervalued assets can diminish a trust’s value
Real estate, business holdings and other significant assets can be challenging for individuals to value. Professional assistance is often necessary to ensure that the fair market value sought when listing assets for sale actually reflects what those resources are worth.
Factors ranging from market conditions to details about individual assets can drastically alter what buyers might agree to pay for specific trust resources. Trustees generally need to take steps that preserve the value of trust resources and maximize what beneficiaries receive from the trust.
The failure to properly value critical assets before selling them could result in the trust losing significant value. Especially in scenarios where the assets liquidated are main sources of funding for the trust, making a reasonable effort to determine an appropriate fair market value and pursue offers from those willing to pay what the asset is worth is a key responsibility.
When beneficiaries realize that a trustee has damaged a trust by selling assets for less than their fair market value or offering them for sale for unreasonably low amounts, they may need to take legal action. The courts can prevent asset transfers, replace a trustee or hold them responsible for the economic impact of their valuation errors.
Reviewing proposed sale terms or disclosure documents outlining the recent sale of trust resources with a legal professional can help those concerned about trust administration take appropriate legal action.