You may have put your home in a trust to avoid probate court; the court process can be expensive and time-consuming. If your home is in a trust, you’ll know about the income tax and estate tax benefits and their usefulness in estate planning. But, now you need to see if you can sell a house in a trust.
Yes, you can sell a house that is in a trust. There are different categories of trusts, and the presence of a trust makes selling a home more complicated and may affect the sale price.
We’ll explain how trusts work, the different types, and the sale process.
Selling a Home That is In a Trust
Before selling a home in a trust, you may ask what a trust is. Let’s define who is involved in a trust and what a trust does.
Who is involved in a trust?
There are three people or parties involved in a trust:
- Grantor who establishes the trust and places trust assets in it
- Trustee/settlor who manages the trust, reviews the trust document, and follows the terms of the trust
- Beneficiary who the grantor has chosen to receive the assets in the trust
Definition of a trust
A trust is a legal and fiduciary arrangement that allows a third party (trustee) to hold assets, like a house, on behalf of a beneficiary.
Because the arrangement is fiduciary, the trustee is required by law to operate in the beneficiary’s best interest. In a trust, the beneficiary is the person (or people) for whom the grantor created the trust.
A trust is a different legal entity from the person who owns it. Typically, a third person (trustee) manages the trust. But, the owner (grantor) sometimes names themself as the trustee.
As part of estate planning, a trust is meant to make it easy for the beneficiary to receive assets and avoid the probate process. Selling your home depends on the type of trust you currently have.
Irrevocable Trust vs. Revocable Trust
An irrevocable trust is not malleable after it’s created. That means the grantor cannot change the trust without the beneficiary’s consent. The trustee takes control of the assets as soon as the grantor establishes the trust.
A revocable trust, or living trust, that the grantor can change after the trust is created. That may mean adding or removing beneficiaries. Also, the grantor may alter the way the assets in the trust are managed.
The critical takeaway is that selling a house in a trust depends on the trust your home is in and the trustee.
What Is a Trustee?
A trustee is a person the grantor appoints to manage estate property in the trust. The trustee must manage and administer the trust per the grantor’s instructions.
A trustee has many responsibilities; the chief responsibility is to follow the grantor and trust’s instructions. Typically, trustees are required to fulfill the terms of the trust agreement and do the following:
- Fulfill fiduciary role: The trustee must act in the beneficiary’s best interest. In other words, the trustee is a fiduciary with a legal duty to act on behalf of the beneficiary.
- Understand the trust terms: The beneficiaries and records need to be reviewed by the trustee and verified for accuracy.
- Make decisions: The trust may give discretionary power to the trustee. The trustee must make decisions about how beneficiaries receive assets and invest accordingly.
- Keep through records: The trustee will file taxes and keep financial records.
- Administer the trust: The trustee will distribute the assets to the beneficiaries.
- Communicate with the beneficiaries: Providing financial statements and tax information and answering questions are examples of a trustee’s communication responsibilities.
Acting on Behalf of a Beneficiary
Acting on behalf of a beneficiary is a trustee’s legal and ethical duty. That legal and moral duty characterizes the trustee as a fiduciary or someone with a fiduciary duty.
A fiduciary is a person who acts on behalf of another person. In a trust, a trustee acts on behalf of another person or the beneficiary.
A trustee performing their fiduciary duty:
- Acts with the beneficiary’s needs in mind
- Avoid conflicts of interest
- Make decisions in the best interest of the beneficiary
Laws controlling the fiduciary duty and the relationship between trustee and beneficiary are essential because of how much power a trustee wields. For instance, the trustee legally owns the property in the trust. They also control the distribution of the property.
When you sell an asset, in this case, real estate, the contract outlines the conditions under which the sale goes through.
Full title guarantee: A sale agreement with a title guarantee makes the seller responsible for specific promises. The law describes what those promises must include the following:
- The seller has the right to sell the asset
- The property on the title is the one being sold
- The seller will ensure the buyer has a free and clear title to the real property
- The sale is not affected by the following:
- Property taxes
- Third-party claims
Limited title guarantee: A limited title guarantee enforces the first three promises on a full title guarantee. The fourth point is an assumption, and the seller does not have to ensure whether the sale is unaffected or not.
How to Sell a House That’s in a Trust
Step number one of selling a house in a trust is to contact the trustee.
The trustee is the person responsible for managing the trust. That person has the resources to provide you with appropriate information on how to sell the home. You may have to get the trustee’s permission to sell the house.
Step number two is locating a buyer. You can hire a real estate agent and go through the long process of a traditional sale. In a conventional deal, you’ll be responsible for paying for the following items:
- Realtor fees
- Closing costs
Alternatively, you can contact a cash buyer who will purchase the home as-is. If you want to sell the house fast, consider contacting We Buy Houses for Cash to request a no-obligation offer.
We make selling your house in trust easy and stress-free, so you have peace of mind. You don’t have to worry about repairs, cleaning, or showing your home to strangers. We’ll give you a fair cash offer and close on your timeline.
Step three considers the factors determining how you can sell your house. The following factors determine how to sell a house that’s in a trust:
- Type of trust
- Whether the grantor is alive or dead
- Who is selling the home
How to sell a house that’s in a revocable trust
Selling a house in a revocable trust is the least difficult because a revocable (or living) trust allows the grantor to modify the trust.
You might have your home in a revocable trust to protect your family in the event of your death, but now you need the flexibility to sell your home.
As the grantor of a revocable trust, you may be able to sell the home as the trustee and keep the money from the sale in the trust.
You can also transfer the home’s title to your name and sell it.
How to sell a house that’s in an irrevocable trust
You may have put your house in an irrevocable trust to get the tax breaks. Recall that the grantor cannot change an irrevocable trust without the beneficiary’s consent.
If your home is in an irrevocable trust, you can attempt to break the trust with consent from the beneficiary. With permission from the beneficiary, you can take the title and sell the home as your own.
You can also keep the trust in place and sell the home with the trustee. You and the trustee will need to do the following:
- Ensure that the trustee has the power to sell the home
- Invest assets that must be invested
- List and sell the home
- Prove the validity of the trust
- Trustee signs the purchase agreement with the buyer
- Proceeds from the sale go back into the trust
- Pay capital gains tax
How to sell an inherited house in a trust
When the grantor of the trust dies, the trust becomes irrevocable. The trustee becomes responsible for managing and distributing the assets to the beneficiary. Usually, when you inherit a house that was in a trust, you are likely able to sell the home. It’s yours to sell.
But, in some cases, the best bet is for the trustee to sell a house. The trustee may sell the house and distribute the proceeds if there are multiple or no named beneficiaries.
Paying taxes when you sell a house inherited in a trust is somewhat complex because each trust is created differently. Contact an attorney to discuss any questions you may have about the sale of the home.
The key takeaways are the following ideas:
- A trust consists of a grantor and a trustee to act on behalf of the beneficiary.
- You can sell your house if it’s in a trust, but the type of trust affects how the process unfolds.
- To sell a house in a trust: (1) contact the trustee, (2) find a buyer, (3) understand the factors affecting your home sale.
After working through the legal issues, selling a home can be challenging. You’ll have to make the house market-ready by making repairs, showing the house, and finding buyers.
You can avoid all that hassle by contacting We Buy Houses For Cash. We’ll buy your home in a trust as-is, and you can avoid the repairs and closing costs of working with a real estate agent.