How do You Sell a House Held in a Revocable Trust?
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If you are trying to sell a house that is being held in a revocable trust, the process may feel intimidating, but it does not have to be. Whether you are the original owner who set up the trust or someone who inherited the property, there are steps to follow to make the sale smooth, legal and financially sound.
A revocable trust is a common estate planning tool to simplify asset transfer and avoid the lengthy probate process. But when it is time to sell a home held in one, understanding the trust's terms and your authority over it is crucial. The approach differs depending on whether you are the one who created the trust or you inherited the property after the grantor’s death.
If You Created the Trust, You Are in Control
Selling a home that you placed into a revocable trust — also known as a living trust — is often straightforward. Since you are still alive and the trust is “revocable,” you can make changes as you see fit. This includes selling the property.
Start by reviewing your trust document to confirm that it allows the sale of the home. Most revocable trusts give the grantor complete control, but it is best to double check for any restrictions or requirements.
Once confirmed, hire a real estate agent who understands how to handle property sales involving trusts. While the process is similar to a regular home sale, a knowledgeable agent can help with proper documentation and pricing strategies.
Do not forget the tax angle. Even if it is your primary residence, there may be capital gain implications depending on how much the property has appreciated. Speaking to a tax advisor or estate planning attorney is wise to avoid surprises.
After the sale goes through, remember to update your trust documents to remove the sold property from the list of trust assets. This ensures your records stay accurate and helps avoid confusion for future beneficiaries.
If You Inherit the Property, Authority Is Key
Inheriting a house through a trust can stir a mix of emotions and some legal responsibilities. The first step is to determine whether you are the successor trustee. This person is responsible for managing the trust’s assets after the original grantor passes away.
If that is you, your next job is to refer the trust document and its rules and regulations. It should lay out whether the property is to be sold or passed on to beneficiaries. Some trusts mandate a sale; others leave it up to the trustee’s discretion.
Because laws vary by state and trusts can contain complex language, it is smart to bring in an estate planning attorney at this stage. They can help interpret the trust, guide you through your obligations and make sure everything complies with state law.
Before listing the home, get it appraised to establish its fair market value, especially important if there are multiple beneficiaries. An impartial valuation helps ensure everyone receives a fair share of the proceeds.
Then, just like any other sale, work with a real estate agent who understands trust sales and inherited property.
If you inherited the home, you will likely benefit from a step-up basis, which adjusts the property’s cost basis to its market value at the time of the grantor’s death, potentially reducing or eliminating capital gain taxes when you sell.
Keep an Eye on Taxes & Paperwork
Regardless of who’s selling — grantor or inheritor — taxes can sneak up if you are not careful. The type and amount will depend on your state, the property’s value and whether it is a primary residence or not. Capital gains, inheritance tax and estate tax are all possibilities worth exploring with a professional.
Also, pay close attention to any liens on the home. These need to be addressed before finalizing the sale. And once the property changes hands, make sure the trust is updated and the sale proceeds are distributed exactly as outlined in the trust document.
Final Thoughts
Selling a home that is held in a revocable trust is not wildly different from a traditional home sale, but it comes with extra layers. If you are the one who created the trust, you have the flexibility to act much like any other seller. If you inherited the home, you will need to be more cautious and ensure every legal box is checked before moving forward.
In both scenarios, surrounding yourself with professionals — real estate agents, attorneys and tax advisors — can make the experience smoother and help you avoid costly missteps. It is not just about closing a sale; it is about honoring the legal structure that governs the property and ensuring a fair outcome for everyone involved.