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Selling a Home with a Trustee

I. Selling a house in a trust

Selling a house in a revocable trust isn’t complicated. If you’ve set up a trust and appointed yourself as trustee, you can manage the real estate just as if the title were still in your name. If you’re incapacitated and your successor trustee steps in to manage your assets, he can do the same.

Most elements of the sale — negotiating a price, getting a home inspection, attending the closing — are no different from when you sell property as yourself, rather than as a trustee.

If the house you inherited is held in a trust, you will need to work with the trustee to sell it. For the most part, selling a home held in a trust is not too different from selling a home that you own however the sale of an inherited house can be accomplished in two ways.

  1. The trustee conducts the sale of the property and the proceeds will become assets of the trust.

      2.The trustee transfers title of the property to your name so you can sell the property.

II. What is a Trust

There are several different types of trusts individuals can establish. But they typically fall under two categories which are revocable trusts and irrevocable trusts.

In a revocable arrangement, the trustor maintains legal ownership and control of trust assets. For this reason, the trustor would be responsible for paying taxes on the income those assets generate and the trust may also be subject to estate taxes should its value breach the tax exempt threshold at the time of the grantor’s death.

A living trust—allows you to put your assets in a trust while you’re still alive. If your living trust is revocable, as almost all are, it gives you great flexibility. You or someone in whom you have confidence manages the property, usually for the benefit of you or your family.

With an irrevocable trust, the trustor passes legal ownership of the trust assets to a trustee. However, this means those assets leave a person’s property effectively lowering the taxable portion of an individual’s estate. The trustor also relinquishes certain rights to mend the trust agreement. For example, a trustor usually can’t change beneficiaries of an irrevocable trust after they have been established. This is not the case with a revocable trust.

How They Work

Requirements for setting up a living trust vary with each state. In general, you execute a document saying that you’re creating a trust to hold property for the benefit of yourself and your family, or whomever you want it to benefit.

Some trust declarations list the major assets (home, investments) that you’re putting in trust; others refer to another document (a schedule) in which you list the exact property that will begin the trust; or you may simply transfer the property to the trustee under the trust agreement. In any case, you can add and subtract property whenever you want.

You will have to change the ownership registration on whatever property you put into the trust–deeds, brokerage accounts, bank accounts, etc.–from your own name to the name of the trust (e.g. The John A. Smith Trust)

A trustee manages the trust and its assets yourself. You can buy or sell it property, or make any other changes you like. If your trust holds a home and you sell the property, and if you realize capital gains, you must report the gains on your personal tax return.

III. Selling a home with a trustee

Step 1

Verify the trust documents to confirm that the trustee has the power to sell the property. Usually, a provision granting the trustee the power to sell will be included in the trust document. If no power is granted, most courts will agree that the power is implied unless otherwise stated within the trust document.

Step 2

Have the trustee hire a real estate agent who will list the home for sale. Again, the real estate agent will want to see the trust documents to confirm that the house in the trust can be sold and that the trustee is authorized to conduct the sale.

Step 3

Provide proof to the title company that the trust is valid, that the trustee is identified as such by the trust document. In addition to the trust document, the title company may require a Certification of Trust signed by the trust attorney, a death certificate of the trust creator and a tax ID number.

Step 4

Submit a closed purchase agreement with the buyer. This requires the signature of the trustee. Funds from the sale become assets of the trust the trustee may distribute to you or leave in the trust account for safekeeping.

IV. Selling the Home without a Trustee

Step 1

Review all trust documents to ensure there is no provisions that exist to prevent the trustee from transferring title of the property to you. If no restrictions exist, the trustee has the discretionary power to transfer the asset to the beneficiary(s).

Step 2

Request that the trustee transfers the title of the home to your name. While the trustee has the power to do so, the trustee is not required to. It is up to the trustee to determine the best course of action for the trust.

Step 3

Transfer the deed of trust for the home into your name. This step requires the cooperation of the trustee. The trustee will need to prepare a deed form that transfers the property from the trust to you. The trustee needs to file the completed deed with the local property office to make it official.

Step 4

Hire a real estate agent to sell your house. Proceeds from the sale will go directly to you since you hold title to the property.

This is a very generalized information on how to sell an inherited property, however, please consult your local CPA, Attorney or Financial Planner to make sure that your states laws & regulations are followed.

V. Other things you need to know

Deed Laws

Research deed law in your state. Every state requires a “grantor” or seller — you, in your job as trustee — to sign a deed conveying property to the “grantee” or buyer. Some states also require the grantee to sign the deed, and some want one or possibly two witnesses to sign the deed as well.

The Title Company

Show a copy of the trust documents to the title company. The company’s job is to research your property’s ownership history and confirm nobody else has a claim on it. Reviewing the trust documents helps the title company establish that the trust has a clear title and the right to sell it. Without a clear title, the lender is unlikely to grant a mortgage to the buyer.

Transferring Ownership

Sign the deed transferring ownership to the grantee. You do this at the closing, where you sign as, for example, Jane Smith, trustee of the Jane Smith Trust. If you and your spouse have a joint revocable trust, the bank will want both of you to sign. Even if you have the authority to sell the house, the bank will want the security of two signatures.