Who is responsible for expenses after homeowner’s death: trustees or beneficiaries?

In order to file the updated deed, the county required us to have an inspection and to make certain repairs to the property. We have other expenses associated with the property, including the annual home insurance premiums and real estate property taxes. We’d like to sell the home this year.

So far, I have footed the bill for almost all of the expenses of owning and maintaining the property. I’d like to know who should pay me back and for which expenses. Who is responsible for paying these expenses — the two trustees (50/50) or the three beneficiaries (50/25/25)?

A: Let’s start with the hidden question in your letter relating to filing the updated deed and the trust that holds ownership to the property.

At one point, your father owned the home in his own name. Sometime later, he set up a living trust. For the living trust to work, your father’s assets had to change from being held in his name to the name of the trust.

He would have changed his bank and stock accounts from his personal name to the name of his trust. More importantly, he would have had to convey his ownership of the home to the trust. In most places, the transfer of the home should have been a simple task that would have required that he sign a deed to convey his ownership interest in the home into the trust.

Now, in some places, local municipalities may require the payment of a fee in order to do this. Some may even require a home inspection prior to allowing the transfer of the ownership of the home into the trust. The municipality in which the property is located required repairs to the home to meet the requirements of the local municipal building code.

We suspect this is what happened. While alive, your father would have still owned the home, but the home would have been held in his living trust. Once the title to the home was put into the name of the living trust, your father would likely have been both the trustee and the beneficiary of the trust. You and your step-brother were likely named successor trustees. Upon your father’s death, you and your step-brother became co-trustees of the trust. Likewise, your father would no longer be the beneficiary of the trust and you and your two step-siblings became the beneficiaries of the trust.

In your capacity as trustee, you act on behalf of the trust. As a beneficiary of the trust, you are one of three owners. The trustee should not be personally liable for the debts and expenses of the trust. Any expenses incurred by the trust should be paid out of the trust assets. So if the trust also has some of your father’s bank accounts, the expenses for the home could be paid out of those accounts.

A well drafted trust agreement should have details about how the trust should be managed and how the trustee should deal with any expenses. Please read over the trust document carefully to understand what you are expected to do and how and when expenses incurred by the trust are paid and reimbursed.

When a living trust only holds a home, the trustee might pay out money for expenses, but the trustee should be reimbursed for those expenses by the owners of the trust. In your case, you should bear 50% of the expenses and your step-siblings should each pay 25%.

If you haven’t kept an ongoing list of the expenses you’ve paid on behalf of the trust, we encourage you to create that list right now. Make sure you can document all of the expenses you’re claiming for reimbursement. You can then present a list of the expenses to your step-siblings, and ask them to reimburse you for their share of the expenses. If they’re unable to give you the cash today, you should be able to subtract those expenses from the proceeds when you sell the property. The net proceeds, minus all expenses including your reimbursements, would then be split among you and your step-siblings.

Of course, there could be complicating factors in your situation. So, consider speaking with the estate attorney who drafted the trust or another estate attorney. The trust may have specific language as to how and when the home may be sold and may also provide for specific reimbursement to the trustees if they pay out any money to cover expenses for the home. The trust may also provide for some compensation to the trustees for the time they spend on trust affairs.

(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)