When you want to sell a house that is in a trust, you need to know the ins and outs of what it takes to make the sale. There are a few things that you need to know before you can sell the property and knowing these things will help to make the process go as smoothly as possible.
What is a Trust?
First we need to understand what a trust is. A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property for the benefit of a third party, the beneficiary. The trustor can be the beneficiary, or someone else can set up a trust for the benefit of someone else.
What Kind of Trust do I have?
Second thing you need to know is what kind of trust you have. Second thing you need to know is what kind of trust do I have? There are several types of trusts that can be set up for different purposes including: Living Trusts or Revocable/Irrevocable trust.
Living trust is a written document in which an individual’s assets are provided as a trust for the individual’s use and benefit during his lifetime.
A revocable trust can be changed or terminated by the trustor during his lifetime. An irrevocable trust, as the name implies, is one the trustor cannot change once it’s established, or one that becomes irrevocable upon his death.
Selling a House in a Trust
Now that we have some of the basics down, let’s talk about how to sell a house in a trust. The process for selling a property in a trust is pretty much the same as if you were selling any other property.
1 – Selling a house in a Revocable Trust as the Grantor
The first thing you need to know is that if the house is in a revocable trust, then the grantor can make changes or dissolve the trust at any time. Perhaps you put your house in a revocable trust in case of your death, but now you’d like to downsize or you just want to cash out and sell it. If you’re the grantor of a revocable trust, you pretty much have two choices for selling your property::
- Sell the home as the trustee and keep proceeds in the trust
- Transfer the title of the property to your name and sell it as your own
In any case, selling a property in a revocable trust is pretty simple because the grantor is able to make changes or dissolve at any time.
If you’re acting as the trustee, you’ll just need to verify the validity of the trust with the title company prior to sale. If you transfer the title to your name first, you can eliminate that step
2 – Selling a House in an Irrevocable Trust as the Grantor
If you’re the grantor of an irrevocable trust, then it gets a little more complicated because once you place your property in this kind of trust, there’s no changing your mind. The only way to sell is by getting consent from all beneficiaries who are named in the document.
If your home is in an irrevocable trust, you may exercise one of two options if you decide to sell:
- Break the trust with permission from the beneficiaries
- Keep the trust intact and sell the home
If you break the trust, you can take back the title of the house and sell it as your own. If you keep the trust as it is, you will need to sell it with the trustee, we will tell you how:
1 – Review the document carefully to see if there are any restrictions on the trustee’s power
2 – Make a decision of weather you would like to sell on the market or directly to an investor
3 – Prove the trust’s validity to the title company by providing a Certification of Trust, a grantor’s death certificate, and a tax ID number.
4 – Have the trustee sign the purchase agreement with the buyer
5 – Earnings from the sale go back into the trust and the trust pays capital gains tax
Selling an Inherited House in a Trust
Whether the house was in a revocable or irrevocable trust before the grantor’s passing, the trust becomes irrevocable at the time of the grantor’s death.
The trustee at this time is in charge of distributing the assets in the trust to the named beneficiaries. They’ll typically hire an attorney to write up a Trustee’s Deed, which transfers ownership out of the trust and into the hands of the beneficiary. So if you inherited a house that was in a trust, it’s likely that it’s now yours to sell.
If you need to sell your inherited house fast, there are a few ways to go about it. You can either hire an agent, list with an investor or sell directly on the market.
We are here to help you with your house sale and can explain all the ins and outs of selling a home in trust in your time frame
Reach out to us to get all the info you need with no obligation and at no cost to you, completely free.
Just fill in the form below and we will call you back in 30min.
Go To House Buyer does not provide legal, tax, or investment advice. This material is for informational purposes only. It should not be considered as investment advice and may not be used as a basis for any financial decisions. Please seek advice from a professional in these areas before making a decision.