A house being held in a trust doesn’t prevent it from being sold.
But there are a few extra details to get right if that is the case.
The process can vary depending on whether the trust is revocable or irrevocable, who is serving as trustee, and where the sale proceeds go after closing.
This guide will walk you through the process in six steps and cover the paperwork and tax implications along the way.
Can a house in a trust be sold?
Yes, you can sell a house held in a trust.
The property can typically be sold directly from the trust without having to transfer it into someone’s individual name.
But the sale needs to follow the trust agreement and any state laws that apply to the trustee’s powers.
Some trusts give broad authority to sell real estate, while others include restrictions or additional requirements that need to be addressed before the sale can close.
The exact steps depend on how the trust is structured.
Who can sell a house held in a trust?
The acting trustee is the person who can sell property owned by the trust.
That could be the person who created the trust (the grantor), an independent trustee, or a successor trustee who has taken over administration.
Things can get more complicated if there are multiple trustees.
The trust agreement should spell out whether the co-trustees need to approve or sign the sale, whether a majority can act, or whether one trustee has specific authority.
And a successor trustee can’t necessarily step in just because they’re named in the trust.
An event that allows them to take over — such as the resignation, incapacity, or death of the prior trustee — must have occurred, and they may need to formally accept the role before acting.
The trustee handling the sale also has a responsibility to follow the trust terms and their fiduciary duties to the beneficiaries.
That means the trustee can’t simply treat the property as their own or make decisions that benefit themselves at the trust’s expense.
Beneficiaries are different.
They may have an interest in the home and certain rights under the trust, but being a beneficiary does not automatically give someone the power to sell the house.
How the type of trust affects the sale
Not all trusts work the same way when it comes time to sell a house.
The type of trust can affect who controls the property and how much flexibility there is to complete the sale.
Revocable living trust: These trusts are usually the most flexible. The person who created the trust — the grantor — often serves as trustee and can continue managing the property while the trust remains revocable. That usually makes the sale relatively straightforward.
Irrevocable trust: Selling can be more restrictive because the grantor typically gives up some control after the trust is created. The trustee must follow the powers and limitations in the trust agreement, and the sale may involve co-trustee approval or other requirements depending on how the trust was written.
The rules can be especially important when the grantor is still alive. We cover that situation in more detail in our guide to selling a house in a trust before death.
Testamentary trust: A testamentary trust is created through a will and becomes effective under the terms of that will. These trusts manage and distribute assets to beneficiaries, but they do not affect the sale of property during the creator’s lifetime. Because they are created through a will, they’re established as part of the probate process.
No matter the type, check the governing document for the specific powers and restrictions that apply to your sale.
How to sell a house in a trust in 6 steps
Many of the steps to selling a house are the same whether or not the property is held in a trust.
But there are a few additional requirements you need to handle along the way.
Those can include the trust agreement, trust-specific disclosures or advisories, and documents needed for title and closing.
Here’s how to sell a house in a trust in six steps.
1. Confirm the property is titled in the trust
Don’t assume the house belongs to the trust just because it appears in the trust paperwork.
You should pull the latest recorded deed and look at how ownership is listed.
If the home was properly transferred into the trust, the deed should reflect that.
But sometimes the trust paperwork and the recorded deed don’t match.
Here’s an example.
Suppose John Smith created the John Smith Living Trust and included his home on the trust’s schedule of assets.
But the deed still lists “John Smith, an individual” as the owner.
That means the property was probably intended for the trust but was never actually deeded into it.
You’ll want to figure that out before putting the home on the market.
A real estate agent can help you confirm how title is held through a title company. If there’s a problem with how ownership was transferred, a trust or estate attorney may need to help resolve it.
You can also obtain the recorded deed yourself from the county recorder, clerk-recorder, or local office that maintains land records.
Verifying that the trust holds title from the get-go can prevent a major hassle once you’re further along in the sale.
2. Review the trust terms and sale requirements
Next, read the parts of the trust that deal with real estate and the trustee’s powers.
Look for anything that affects the sale or adds another step to the process.
For example, the trust may:
- Give the trustee broad power to sell real estate
- Require multiple trustees to approve or sign the transaction
- Require consent from a beneficiary, trust protector, or another named person
- Include special instructions for a particular property
- Set conditions for how the home is valued or sold.
If there are co-trustees, check how decisions must be made.
The document may require them to act together, allow a majority to make the decision, or give one trustee specific powers.
Also look for any language that limits the trustee’s ability to sell or places conditions on the transaction.
Have a trust or estate attorney explain anything that isn’t clear.
Trust documents can be very specific, and you don’t want to discover an approval requirement or restriction after the home is already under contract.
3. Gather the trust documents needed for the sale
Once you know what the trust requires, gather the documents that show who can act for it.
The exact paperwork can vary, but you may be asked for:
- Certification of trust
- Trust agreement or relevant portions of it
- Any amendments or restatements
- Documents showing a change in trustee, if applicable
- Identification for the trustee or co-trustees signing the sale documents.
A certification of trust is especially useful because it summarizes important details about the trust without requiring every provision to be disclosed.
The title company or closing attorney will tell you exactly what they need to verify the trustee’s authority and prepare the closing documents.
Don’t assume the paperwork you already have is complete.
An old version of the trust, a missing amendment, or documentation that doesn’t reflect the current trustee can hold things up later.
4. Find a real estate agent experienced in trust sales
Selling a home held in a trust can involve more moving parts than an ordinary sale.
The trustee’s authority, title, trust documents, and signing requirements may all need to be verified before the transaction can close.
The agent may also need to coordinate with co-trustees, title or escrow, and a trust or estate attorney if an issue comes up.
Ask how many trust sales they’ve handled and have them walk you through one.
And ask what issues came up during those sales.
Someone with real experience should be able to talk about things like trustee signatures, title problems, trust documents, or escrow requirements.
Add that to your list of questions to ask a real estate agent when you interview them.
But experience selling homes in a trust shouldn’t be the only requirement.
Your agent should also have experience selling in your area and price range.
You want someone who understands the trust side of the transaction and knows how to sell the property in your local market.
5. List the property and review an offer
Once the trust and title issues are in order, the home can be priced, marketed, and shown much like any other property.
The appropriate trustee or trustees will need to sign a listing agreement with the real estate agent before the home goes on the market.
The agreement should identify the seller correctly and be signed in the proper trustee capacity.
The same attention is needed when an offer comes in.
Price matters, but so do the terms that affect how likely the transaction is to close.
Also confirm that the seller is identified correctly in the purchase agreement and that anyone whose approval or signature is required under the trust is included in the process.
The trustee should consider whether accepting the offer is a reasonable decision for the trust and its beneficiaries.
Any trust-specific disclosures or advisories required in your state should also be completed as part of the transaction.
6. Sign the closing documents in the proper trustee capacity
At closing, the trustee signs on behalf of the trust rather than simply signing as an individual owner.
The exact wording can vary, but the signature should reflect the person’s role as trustee.
The title or escrow company — or a closing attorney in some states — will prepare the deed and other documents based on how the property is titled.
In most cases, the house can be transferred directly from the trust to the buyer. It does not need to be moved into the trustee’s personal name first.
If more than one trustee is required to sign, each will need to complete the appropriate closing documents.
The closing company may also ask for an updated certification of trust, trustee affidavit, or another document before recording the deed.
The deed can be recorded and ownership transferred to the buyer once the final documents are signed and the buyer’s funds are received.
What happens to the proceeds from the sale of a house in a trust?
The money from the sale usually remains part of the trust after the house is sold.
Amounts such as an existing mortgage, liens, commissions, and other closing costs are paid from the sale proceeds at closing.
The remaining proceeds are then disbursed according to the closing instructions, typically to a bank account held by the trust.
What happens next depends on the trust.
The trustee may be allowed or required to keep the money in the trust, reinvest it, use it to pay trust expenses, or distribute some or all of it to the beneficiaries.
A grantor who controls a revocable living trust may continue to control the proceeds after the sale.
An irrevocable trust can have very different rules, so the trustee needs to follow the distribution provisions in the trust agreement.
The closing professional does not decide how much each beneficiary should receive.
Unless the closing instructions provide for an authorized direct payment, beneficiary distributions are typically handled by the trustee after the sale closes.
Tax implications of selling a house in a trust
Selling a house held in a trust can result in capital gains tax.
But who reports the gain depends on how the trust is treated for tax purposes.
A revocable living trust is generally a grantor trust, which means the grantor is treated as the owner for federal income tax purposes. Some irrevocable trusts are also grantor trusts, while others are separate taxpayers.
A home held in a grantor trust may still qualify for the federal home-sale exclusion if the grantor meets the applicable ownership and use requirements.
The property’s adjusted basis also affects how much gain is taxable.
The property’s basis may change after someone dies, depending on the circumstances, so a post-death sale should be evaluated separately.
State taxes may apply as well.
Because the tax treatment depends on the trust and the circumstances of the sale, it’s worth having a CPA or tax attorney review the transaction.
Get help selling a house in a trust
Selling a house held in a trust comes with a few details that can make the transaction more involved.
An experienced listing agent can help keep the real estate side of the sale moving while coordinating with other professionals when needed.
We can match you with one or more local listing agents who fit your property and situation.
We review an agent’s sales history, reviews, and other performance data as part of our agent vetting process.
Our service is free for sellers, and there’s no obligation to work with any agent we recommend.
