Can a Trustee Pay the Mortage on Trust Property?

Full Question:

In Indiana, does a beneficiary who received a devise of real property under a trust, have any right to have the mortgage attached to the real property paid from the trust assets--whether or not the trust instrument directs the trustee to pay the mortgage. Please include any case-law and citations.
10/10/2011   |   Category: Trusts   |   State: Indiana   |   #25516


In some cases it is necessary for the trustee to make the mortage payments to prevent foreclosure on a property, but the answer will dpeend on all the facts and documents involved in the situation. Our service does not provide case law research, as it offers general legal information.

Please see the following IN statute to determine applicability:

IC 30-4-3.5-2 (a) A trustee shall invest and manage trust assets as a....

(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.

(b) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.

(c) Among circumstances that a trustee shall consider in investing and managing trust assets are those of the following that are relevant to the trust or its beneficiaries:

(1) General economic conditions.

(2) The possible effect of inflation or deflation.

(3) The expected tax consequences of investment decisions or strategies.

(4) The role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property.

(5) The expected total return from income and the appreciation of capital.

(6) Other resources of the beneficiaries.

(7) Needs for liquidity, regularity of income, and preservation or appreciation of capital.

(8) An asset's special relationship or special value, if any, to the purposes of the trust or to one (1) or more of the beneficiaries.

(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.

(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this chapter.

(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use the special skills or expertise.

[As added by P.L. 137-1999, SEC. 3.]