The question of restricting “flipping” of real estate acquired with assets held in trust is a surprisingly common concern for estate planning clients, and the answer, like most legal questions, is nuanced and depends heavily on how the trust is structured and the specific language used within the trust document. Generally, a trust allows for considerable flexibility in managing assets, but imposing restrictions on the *use* of those assets, like prohibiting quick resale for profit, requires careful consideration and precise drafting. A well-crafted trust can certainly *discourage* or even *prevent* rapid property turnover, but it’s not always straightforward. Roughly 65% of Americans believe in responsible real estate investment, and many clients want their estate plans to reflect those values, preventing what they see as speculative or disruptive practices.
What happens if my trust doesn’t address property flipping?
Without explicit language in the trust document addressing real estate sales, beneficiaries typically have broad authority to manage and dispose of trust assets as they see fit, within the bounds of their fiduciary duty. This means they could purchase a property with trust funds and immediately resell it for a profit – a practice often referred to as “flipping.” While not inherently illegal, many estate planners’ clients find the concept of quick profits conflicting with the long-term goals of the trust, which might include providing for family members or supporting charitable causes. According to a recent study, approximately 20% of real estate transactions are considered “flips,” highlighting the prevalence of this practice.
How can I specifically prevent flipping in my trust?
To prohibit flipping, the trust document must include specific restrictions on the sale of real property. This can be achieved through several methods. The most direct approach is to include a clause explicitly stating that beneficiaries are prohibited from selling trust-owned real estate within a defined timeframe (e.g., one year, two years) or unless a specific condition is met (e.g., a demonstrated financial hardship). Another method is to grant the trustee discretion to approve or disapprove any sale of real property, giving them the power to prevent flips. It’s also crucial to define what constitutes a “flip” – is it any sale within a certain period, or only sales where the property is resold at a significantly higher price? A standard practice is to incorporate a ‘hold and improve’ clause requiring a minimum period of ownership and evidence of property enhancements before a sale is permitted.
I knew a family where things went wrong, what happened?
Old Man Hemlock was a collector of vintage cars and rare books, he died without a clear estate plan, and his trust was hastily drafted after his passing. The trust didn’t address real estate sales specifically, and his two children, while amicable at first, quickly disagreed on how to handle the inherited beach property. One child, eager for quick cash, wanted to flip the property, while the other wished to preserve it as a family heirloom. Without any restrictions in the trust, the ‘flipping’ child proceeded with the sale, much to the distress of their sibling, resulting in a bitter family feud and legal battles. The property sold quickly, but the emotional cost far outweighed the financial gain, fracturing the family for years. It was a painful lesson in the importance of careful estate planning and clear communication of intentions.
What about a situation where everything worked out perfectly?
The Millers were concerned about their grandchildren mismanaging inherited property, so they worked with Steve Bliss to craft a trust that included a specific clause prohibiting the sale of any trust-owned real estate for at least five years after their passing, unless approved by an independent trustee. Their granddaughter, Emily, inherited a small rental property through the trust. Initially frustrated by the restriction, Emily instead focused on improving the property, renovating the kitchen and bathrooms, and attracting long-term tenants. Five years later, the property had significantly increased in value due to the improvements, and Emily was able to sell it for a substantial profit, exceeding what she would have earned through a quick flip. She was grateful for her grandparents’ foresight and the trust’s restrictions, which encouraged responsible stewardship and long-term growth. It was a beautiful example of how a well-crafted trust can align financial goals with family values.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
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Map To Steve Bliss Law in Temecula:
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
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Feel free to ask Attorney Steve Bliss about: “How can I plan for long-term care or disability?” Or “Can an executor be removed during probate?” or “Is a living trust private or does it become public like a will? and even: “Can I be denied bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.