Legal Question in Wills and Trusts in California

First, everything depends on what the Trust document says and I have not had a chance to read it. My only word of caution is that as Trustee you are held to a very high fiduciary duty. Before buying out the sibling you better be careful to make sure that you have disclosed all facts affecting the value and how you derived at the value of the property and his or her share. And it would help if the sibling had his own attorney involved. For that matter, you should consult an attorney yourself as that is a normal trust expense and it will help you determine if this plan is appropriate and how to document your actions.

You can do it if everyone is in agreement, including on the appraisal of the fair market value, but legal representation is essential for you, and for the bought out party. Also, there may be other implications to consider, such as no exemption from reassessment for transfers which are not parent/child. And, few if any lenders are willing to lend to irrevocable trusts.

I agree with the foregoing answers and write to suggest you discuss an alternative with the attorney you hire to work with you on this. It is worth at least exploring whether the best solution is to form a manager managed LLC owned by the three remaining beneficiaries and managed by you, and then have the LLC buy the property out of the trust. It's often a lot more manageable to handle an LLC than a trust, and it may be financially advantageous too.

Mr. McCormick's idea about an LLC has merit. If you and the beneficiaries are the children of the person creating the trust, then the trust could distribute to all four of you, then the four of you can form an LLC, then you can buy out the beneficiary who wants to be bought out, and since the 25% interest in the property is transferred internally within the LLC, it's not subject to a Prop 13 reassessment, which means the property taxes will remain the same.