What are the steps to partition trust property?

4282023-300x300Partitions are lawsuits that split up the property between multiple co-owners so that each can take their equity out of the home. The prototypical partition is that between unmarried partners or business partners. Both own equal shares, but only one wants to end the relationship and take their money out. Partitions enable this to happen, usually ending with a court-ordered sale of the subject property.  

The presence of a trust changes this calculus. This is because a trustee typically holds the property for the benefit of another. (Estate of Yool (2007) 151 Cal.App.4th 867, 874.) As such, pursuing a partition becomes much more difficult to do, especially because partitions cannot be used to disrupt the purpose and provisions of an express irrevocable trust.

At the Underwood Law Firm, our attorneys are well-versed in these matters and familiar with the intricacies of the interactions between property law and probate procedures. The following are steps that every litigant should keep in mind before pursuing the partition of a property subject to a trust. 

Step 1: Is the Settlor still alive?

The law governing trusts can be, generally speaking, split into two sections: (1) provisions taking effect when the settlor is alive and (2) provisions operating once the settlor has passed away. 

As the “settlor” or “trustor” is the person who created the trust, they have the power to terminate, modify, or revoke the trust that they set up. (Prob. Code § 15401.) For instance, the settlor, with the consent of the trust beneficiaries, might decide to amend and modify the trust so as to prevent a partition outright by including an anti-partition provision in the trust documents. (Prob. Code § 15404.) 

All of this is to say that while the settlor is still around, the trust is in a state of “flux,” so to speak. At any point in time, the settlor might pull a property out of trust or revoke the trust entirely. And most of the time, they are within their right to do so. Unless there are express, written provisions stating otherwise, trusts in California are presumed to be revocable by the settlor. (Prob. Code § 15400.) 

If, however, the settlor has passed away, then the dynamic drastically shifts. As a general rule of trust law, once the settlor or settlors die, the trust becomes irrevocable, meaning its provisions are then set in stone. The only way an irrevocable trust can be modified or terminated is through a petition to do so by each and every trust beneficiary. And even then, the court may still choose to continue the trust if it views the modification as disrupting the material purpose of the trust itself. (Prob. Code § 15403.) 

In addition, the death of the settlor means the involvement of a trustee. Trustees are people (or entities) named within the trust documents or appointed by the court who step in and “administer” the trust. In other words, they take over the trust’s management. Any attempt at partition will run through them. 

Step 2: Is the property subject to an express trust?

Under the partition statutes, where a property or an interest in the property is subject to an express trust, the court may, at its discretion, order that the property be sold. (CCP § 872.840.)

While this provision may be short, it is incredibly important. It has been described as “explicit” in its granting of power to the trial court so that it can use its own sound discretion in deciding whether to allow a partition to go forward, regardless of whether the plaintiff might be entitled to the right under statute. (Richmond v. Dofflemyer (1980) 105 Cal.App.3d 745, 758.) 

But why should the court be allowed to come to this determination merely because a trust is present? The answer is simple. “One cannot, of course, by a suit for partition, put an end to an express trust or defeat its lawful purposes, nor usurp the functions of the trustee.” (Varni v. Devoto (1909) 10 Cal.App. 304, 307.) 

So, if a trust instrument expressly states that the trust property is not to be sold for 20 years, then a beneficiary or trustee seeking a judicial sale would be running head-on into an express provision that states otherwise. 

Step 3: Who is seeking the partition?

Assuming the trust is now being run by a trustee and that no provisions in the trust state that partition cannot be had, the next issue a litigant will face will be whether they are in the “class” of persons entitled to seek a partition. 

If the person who wants the partition is the trustee, then there are likely no problems. First, under the law, the trustee must retain trust property until, in the judgment of the trustee, disposition of the property should be made. This is true even if the trustee is also a beneficiary, which is often the case. (Prob. Code § 16220.) 

Second, once the trustee has made the judgment that selling the property is in the best interest of the trust, they have the express power by statute to dispose of the property, for cash or credit, at public or private sale. (Prob. Code § 16226.) 

Of course, the beneficiaries of the trust may think otherwise, and they can file a petition to restrain a potential sale if they believe it would be a breach of the trust. (Prob. Code § 17200 (b)(12).) 

But what if the beneficiary is the one who wants the property sold? Assuming they have some property interest that is concurrent or future, they can again use section 17200 to modify or terminate the trust. (Id. (b)(13); § 15403.) This is, however, difficult to do. Again, terminating the trust can only be had with the consent of all the beneficiaries. 

So if just one beneficiary wants the property sold, the next best bet is to acquire the power of sale. In other words, the beneficiary must petition the court to become the sole trustee. But this is incredibly difficult to do and involves allegations that the current trustee has breached their fiduciary duty to the beneficiaries. (Starr v. Ashbrook (2023) 87 Cal.App.5th 999, 1024.) 

How can Attorneys at the Underwood Law Firm Assist You?

Lawsuits involving trusts can already be incredibly complex. Adding issues related to partition only further complicates matters for the inexperienced litigant. In these situations, the right attorney can make all the difference. 

At the Underwood Law Firm, our knowledgeable attorneys are here to help. If you are attempting to file a petition concerning the property in trust, wondering whether you can partition the property in probate court, or if you just have questions, please do not hesitate to contact our office

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