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If a Property Is in a Trust, Can It Be Sold?

If a Property Is in a Trust, Can It Be Sold?

Placing real estate in a trust is a common estate planning move, but what happens if you want to sell that property later? Many people worry that once a home or land is in a trust, selling it becomes complicated or even impossible.

At Commonwealth Life and Legacy Counsel, we regularly assist Central Virginia families with questions about managing and selling trust-held property.

In this post, we’ll explain when and how property in a trust can be sold, who has the authority to do so, and what steps to expect along the way.

Different Trust Types and Their Impact on Sales

Sometimes, folks hear that trusts are difficult to work with when selling property. In Virginia, the type of trust that holds the house can make a real difference. To get started, let’s look at a few main trust categories and see how selling might vary.

Revocable Living Trusts

A revocable living trust allows the person who created it, called the grantor, to change or cancel it anytime. In other words, the grantor keeps control over the trust’s assets, so they can typically sell a property inside the trust. This is possible because the grantor and the trustee are often the same person, making the sale mostly straightforward.

When the property sells, the proceeds are usually deposited within the trust. From there, if the person wishes, they can use the money for something else or handle it in accordance with the trust’s terms. This flexibility is one reason revocable trusts are popular in estate planning.

Irrevocable Living Trusts

Irrevocable trusts do not allow easy changes to the original terms. After creation, adjusting or canceling them is tough. Selling real estate in this setting can demand extra steps, such as gaining consent from any beneficiaries or checking whether the trust allows real estate transfers. If the trust document specifically outlines instructions, those must be followed closely.

A trustee who wishes to sell real estate from an irrevocable trust should confirm that the trust language grants them full power to handle the transaction. Without that clear authority, it might be necessary to seek beneficiary approval or possibly ask a court for guidance.

Testamentary Trusts

A testamentary trust is created through a will and takes effect after someone passes away. If the trust includes real estate, the trustee named in the will becomes responsible for that property. Often, the sale process is clear: the trustee can sell the property once they confirm that doing so aligns with the trust’s rules.

Occasionally, a testamentary trust might have a limited timeframe or specific instructions, but in many cases, the trustee can move ahead and sell the home. When in doubt, it’s wise to consult legal counsel before finalizing the sale.

Steps for Selling Real Estate Held in Trust in Virginia

A property sale through a trust involves several formal tasks, from initial planning to closing. Finding your path can be simpler if you go step by step.

Consult Legal and Real Estate Professionals

You’ll need a Virginia estate attorney to look at the trust’s text. They can confirm the trustee’s authority, interpret the trust provisions, and advise on any legal obligations. That way, you’ll know precisely whether a sale is permitted.

It also helps to find a real estate agent who knows trust sales in Virginia. They can help price, promote, and negotiate the sale. A local agent with trust experience is especially valuable when you have specific guidelines to follow.

Prepare the Property for Sale

Gathering trust documents is a wise first step. These include a certification of trust, and if the original grantor has passed, a death certificate might be required. Having these records in order will streamline communications with escrow and potential buyers.

It’s also wise to consider normal home sale preparations, such as small repairs to boost the home’s appeal.

  • Fix known cosmetic issues.
  • Clarify who can sign on behalf of the trust
  • Post clear property details

Complete Escrow and Closing

The last part of the sale involves coordinating with escrow and title teams adept at handling trust documents. They often request the official trust agreement, the deed proving the trust owns the house, and the trustee’s authorization to sign closing forms.

Make sure you supply everything requested, because any missing piece might cause delays. After everything checks out, you can sign the final paperwork and close the sale. Proceeds typically go into the trust or to authorized individuals, according to the trust’s terms.

Trustee Responsibilities and Powers in Virginia

Trustees have special legal obligations. They manage the trust’s money and property for the benefit of the named individuals. Trustees also must follow Virginia rules, such as those found in the Code of Virginia § 64.2-777 and 64.2-778.

Under § 64.2-777, a trustee is often granted significant authority, similar to any sole owner. That can include the power to sell, lease, or mortgage property unless the trust restricts these abilities. Meanwhile, § 64.2-778 highlights a trustee’s power to handle transactions like selling real estate or choosing investments. Keep in mind, these responsibilities attach a “fiduciary duty,” meaning the trustee is required to act in the best interest of the beneficiaries.

Below is a quick summary of some trustee powers clearly recognized in Virginia:

  1. Sell or transfer assets held in the trust
  2. Enter into contracts, including settlement agreements
  3. Borrow or lend money in some circumstances

Of course, the written trust can limit or expand the trustee’s freedom. Always double-check the trust language before acting.

Relevant Virginia Statutes

Virginia follows the Virginia Uniform Trust Code (§ 64.2-700 et seq.), which outlines procedures for setting up trusts, trustee duties, beneficiary rights, and more. Section 64.2-763 covers the trustee’s overall duty to manage the trust as promised to beneficiaries. Section 64.2-764 focuses on loyalty, meaning trustees can’t use trust property for personal gain at the beneficiaries’ expense.

Trustees want to remain transparent, keep records, and avoid any self-dealing. If a trustee fails to meet these duties, beneficiaries or courts may intervene. In short, following the law helps ensure a smooth sale and avoids potential disputes.

Tax Items of Selling Property in a Trust

Before signing off on the final contract, addressing tax responsibilities is wise. A surprising tax bill can arise if you don’t plan carefully.

Capital gains taxes apply to profits earned after selling the home. Who pays these taxes largely depends on whether the trust is revocable or irrevocable. Sometimes, the grantor might be on the hook for the taxes if the trust is revocable, while in an irrevocable trust, the trust itself or its beneficiaries might bear that burden. In addition, federal or Virginia inheritance or estate taxes could come into play if the overall estate is substantial.

Consulting a tax advisor can bring clarity to topics like stepped-up cost basis, partial beneficiary interests, or other matters. A bit of planning may optimize the outcome for everyone involved.

Call Commonwealth Life and Legacy Counsel for Assistance

If you find yourself needing tailored insights on a real estate sale in a Virginia trust, feel free to call Commonwealth Life and Legacy Counsel for guidance. We can examine your documents and clarify whether the trust arrangement permits immediate sale, beneficiary sign-offs, or any extra steps. Call us in Central Virginia at 434-589-2958 or in Powhatan at 804-598-1348. You can also email us at info@winget-hernandez.com or visit our Contact Us page. We want to help you protect what matters most so you can move forward with clarity and calm.