Court Says Trustee Cannot Buy or Sell Real Estate after Trust Termination

May 2, 2024 | Jennifer Harrington

On April 24, 2024, the Iowa Court of Appeals affirmed the district court’s ruling that the trustee could not buy farm real estate as part of the winding-up process of the trust. Although the trustee had obtained an appraisal and had given the other beneficiaries first chance at purchasing the farmland, the court of appeals found there was no adequate reason for allowing the proposed self-dealing. The court also found the trustee lacked the power to sell the real estate since the trust had terminated once the income beneficiary passed and there was no express provision within the trust giving the trustee power to sell during the winding up process.


The Herthel C. Uhl Revocable Trust was established in 2001 and owned 135 acres of farmland. The distribution provisions of the trust were straightforward. Once Herthel passed, the trust would provide lifetime income to a named beneficiary. Once the income beneficiary passed, the trust would terminate. At termination, each one of Herthel’s grandchildren would receive an equal share of the trust. Herthel had five grandchildren – Eric, Jason, Scott, Mark, and Brian.

In 2007, Herthel’s grandson Eric became trustee. Eric was also a remainder beneficiary. In 2022, the income beneficiary passed. Later in 2022, Eric had the real estate appraised. It was appraised at $1,420,650. The trust’s lawyer sent a letter to the four other remainder beneficiaries informing them Eric, as trustee, had decided they had the option to purchase the land “at the appraised value or above” and if no one was interested then the land would “likely go to an auction.”  None of the beneficiaries took the opportunity to purchase the land. Eric then decided he would like to purchase the land, and subsequently executed an agreement with the trust to buy the farmland for the appraised value.

In early 2023, Eric, acting as trustee, filed for court approval of the purchase agreement and authorization to sell the farmland. He claimed that the land “must be sold” in order to terminate the trust and prevent future litigation among the remainder beneficiaries. Three of the other beneficiaries disagreed and resisted. They argued the land did not need to be sold in order for the trust to make a final distribution. The believed the land could be distributed in-kind, with the remainder beneficiaries being tenants-in-common. They also argued the land was worth much more than the appraised value.

After a hearing, the district court did not authorize the sale. The court found the trust terminated once the income beneficiary passed. The court relied on In re Estate of Jurgens, 31 N.W.2d 633 (Iowa 1948) and Noe v. Hawkeye Bank, 570 N.W.2d 114 (Iowa 1997) to find that the trustee’s power to sell did not extend to the process of winding up a trust. The court found this concluded the matter and that it did not need to rule on whether the transaction was self-dealing or if the sale was in the best interest of the trust.

Eric made a motion to reconsider, and the district court amended its ruling to find that it could have authorized the sale, but “the evidence is far from clear that the proposed sale is in the best interests of the trust or all beneficiaries involved.” Eric appealed the district court’s decision, both as trustee and in his individual capacity, and claimed the court was incorrect when it determined that he had no authority to sell once the trust was terminated.


The court of appeals found that the district court had properly applied the holdings of Jurgens  and Noe when finding that the trustee’s power of sale only applies during the “life of the trust” and does not extend past the trust’s termination. The court stated Noe and Jurgens “stand for the general proposition that trustees lack power to sell trust property after termination absent a specific grant of authority from a trust agreement.”

Eric attempted to argue that the trust does not terminate until the beneficiaries receive their distributive shares, but the court found that the death of the income beneficiary terminated the trust and “the trustee’s duty to wind up administration of the trust was triggered.”  

Eric also argued that Jurgens and Noe no longer applied after the adoption of the Iowa Trust Code (Chapter 633A). The court rejected that argument. It found Iowa Code § 633A.1104 requires the trust code to be harmonized with past case law.  Further, § 633A.2201(2), which specifies trustee powers when winding up the affairs of the trust, and § 633A.4402(5),(32), which discusses specific trustee powers, condition a trustee’s power of sale to situations where the sale is “necessary.” Eric argued it was necessary to sell the real estate to avoid future litigation among the beneficiaries. The three resisting beneficiaries argued the land could be conveyed to the beneficiaries as tenants-in-common, and the court agreed a distribution in-kind was possible.

Finally, the court addressed whether the transaction would be impermissible self-dealing. The court stated that trustees are generally prohibited from self-dealing, but self-dealing may be allowed under § 633A.4202(2) when the transaction is approved by the court after notice to the interested parties. Eric argued that In re Estate of Zenisek, No. 08-0938, 2009 WL 1211981 (Iowa Ct. App. May 6, 2009) allows  a fiduciary to purchase trust assets against claims of self-dealing as long as the fiduciary can show the purchase price is fair. The court found that Zenisek did not stand for that proposition and that the facts within Zenisek were materially different. Lastly, the court found that Eric had the burden to “to show fair dealing in all matters within the fiduciary obligation,” and to present an “adequate reason” for the self-dealing transaction. Eric failed to bring forth an adequate reason and therefore the court affirmed the district court’s denial of Eric’s petition to sell the real estate.