Selling a house listed in my trust

[Kajal]

Jurisdiction

California

We want to sell our house which we have included in our trust. Are there additional steps to be followed to sell it. We want a real estate agent to do all the formalities of selling the house as we are currently out of the country. Can it be sold without our physical presence?

 

[Zigner]

We want to sell our house which we have included in our trust. Are there additional steps to be followed to sell it. We want a real estate agent to do all the formalities of selling the house as we are currently out of the country. Can it be sold without our physical presence?

Your real-estate agent and the title company will know how to handle the actual transfer. You should review your trust document to see if there are any changes desired or required because of the sale of the house.

 

[army judge]

We want to sell our house which we have included in our trust. Are there additional steps to be followed to sell it

You don't OWN the home IF its in the trust, the trust owns the home.


Beware, selling real estate OWNED by a trust can create considerable tax consequences.

Before proceeding you should consult a CPA and/or a tax attorney.

Just because something can be done doesn't imply one should do that something.

Make sure you FULLY understand the implications and ramifications of selling real estate OWNED by a trust when one expects to receive the proceeds of the sale.

One method of selling real estate held in trust is to transfer the property directly from the trust to the buyer. All transfer documentation would then be signed by the trustee of the trust. The second method is to transfer the property out of the trust to the owner as an individual. The owner would then sell the property as if no trust exists.

 

[Zigner]

You don't OWN the home IF its in the trust, the trust owns the home.


Beware, selling real estate OWNED by a trust can create considerable tax consequences.

Before proceeding you should consult a CPA and/or a tax attorney.

Just because something can be done doesn't imply one should do that something.

Make sure you FULLY understand the implications and ramifications of selling real estate OWNED by a trust when one expects to receive the proceeds of the sale.

One method of selling real estate held in trust is to transfer the property directly from the trust to the buyer. All transfer documentation would then be signed by the trustee of the trust. The second method is to transfer the property out of the trust to the owner as an individual. The owner would then sell the property as if no trust exists.

All the doom and gloom...yet sales of trust-owned personal residences happen all the time with no adverse consequences. Yes, I agree that the OP should be aware of the various tax implications of selling the home, but that is true no matter how the home is titled.

 

[Kajal]

You don't OWN the home IF its in the trust, the trust owns the home.


Beware, selling real estate OWNED by a trust can create considerable tax consequences.

Before proceeding you should consult a CPA and/or a tax attorney.

Just because something can be done doesn't imply one should do that something.

Make sure you FULLY understand the implications and ramifications of selling real estate OWNED by a trust when one expects to receive the proceeds of the sale.

One method of selling real estate held in trust is to transfer the property directly from the trust to the buyer. All transfer documentation would then be signed by the trustee of the trust. The second method is to transfer the property out of the trust to the owner as an individual. The owner would then sell the property as if no trust exists.

I wanted to add that this is our personal trust so should it be so complicated that we need to transfer the property to us. We have been living in the house.

 

[flyingron]

"Personal trust" doesn't define anything. But if you're talking about an inter vivos (i.e., living trust) as pointed out the closing entity (escrow house, title company, attorney) will know how to handle it. Usually all it takes is the trustee to sign for the trust everywhere and often a copy of the actual trust document. I've bought and sold several houses in my trust. I have my trust document scanned in so I can send the PDF to the closing folks to satisfy their lust for paperwork.

There's no tax issue in this case as the tax treatment is the same as if you owned it directly. The IRS won't let you duck out of things that easily.

 

[zddoodah]

We want to sell our house which we have included in our trust.

When you say that your house is "included in [your] trust," what exactly do you mean by that? At or after the time you created the trust, did you and whoever else is part of "we" sign a deed that granted title from, e.g., "John Doe and Jane Doe, as community property, to John Doe and Jane Doe, as Trustees of the John and Jane Doe Revocable Trust," and did that deed get recorded with the county recorder? Or does the trust instrument simply refer to the house? Or something else?

Can it be sold without our physical presence?

I can't think of any reason why not, but you'll not know for certain until you start speaking with realtors.

 

[Tax Counsel]

There's no tax issue in this case as the tax treatment is the same as if you owned it directly.

That's true if the trust is a grantor trust of the OP. The Internal Revenue Code (IRC) will treat the assets of a grantor trust as though the grantor still owns them directly and the income from trust transactions will end up being the income of the trust grantor.

A revocable living trust is a grantor trust. While the majority of trusts created for estate planning today are revocable living trusts, not all living trusts are revocable trusts. Even if the trust is not revocable there are other powers that a grantor could have that would make the trust a grantor trust, though those kinds of grantor trusts are pretty uncommon. Then there are a whole lot of different trust types that are not grantor trusts.

The point is, all we know is that the house is in a trust that the OP controls and that the OP refers to as "our personal trust." We don't know any the details of that trust, and the details do matter. Don't just assume that all living trusts are grantor trusts and the assets treated as though the grantor still owns them. I have a case now in which those trust details make a huge difference in the estate tax outcome, one of two estates will end up paying more than $1 million more in estate tax depending on the outcome.

So until we know the details of this trust, I would not say there's "no tax issue in this case as the tax treatment is the same as if you owned it directly". It may turn out when the details are known that you are correct, but I certainly cannot say that now with the very little we know right now.

 

[flyingron]

I pretty much said that in my opening sentence. Everything else I said was predicated on the stated assumption that he was talking about his inter vivos trust.

 

[Tax Counsel]

I pretty much said that in my opening sentence. Everything else I said was predicated on the stated assumption that he was talking about his inter vivos trust.

What you did not do was make the distinction between a grantor trust and non grantor trust. Your post suggested that all intervivos (living) trusts are taxed the same way — with the trust being effectively ignored (your penultimate senteance). That is not accurate. An intervivos (living) trust can either be a grantor trust or non grantor trust depending on the terms of the trust, which we do not yet know. The tax consequences are significantly different for a grantor versus a non grantor trust. With a grantor trust, the assets of the trust are still treated as though owned directly by the grantor, making the trust effectively disregarded for federal income tax purposes with the result that the grantor is taxed on the trust income. But for a non grantor trust, the trust itself is the one taxed on its income. So the distinction here is rather important to the tax outcome. While most trusts used in estate planning today are revocable living trusts and thus are grantor trusts, not all of the trusts out there are grantor trusts. So don't fall into that trap of thinking that all living trusts are grantor trusts. Many of them are, but not all, so the details of the trust are important.