Buying or Selling a Property Held in Trust

Trusts are an estate planning vehicle used to protect assets, including homes and other real property. Trusts can be a complex concept, but in general a trust is set up to allow a designated person, called the trustee to manage specific assets for the benefit of one or more individuals, called the trust beneficiary or beneficiaries. The trust is established by a written document that sets forth the purpose of the trust, the powers and duties of the trustee, and the identity of the beneficiaries.

The trustee and beneficiary can be the same person. When real estate is involved, it is common for the beneficiary to reside in the home owned by the trust. Fortunately, property that is held in a trust can typically still be transferred, sold, or conveyed. However, the process is different for a property being sold by a trust as opposed to an individual.

Whether and under what circumstances a property held in trust can be sold depends on the trust itself. The trust may contain restrictions on the sale of property. At the very least, the sale must be approved by the trustee as being in the best interest of the trust beneficiary. This is not difficult when the trustee and beneficiary are the same person. But in some circumstances, this can be tricky. If you are negotiating to buy property from a trust, make sure you are dealing with the correct party with the authority to sell.

Once the terms of the sale are agreed, the closing attorney handling the transaction will need certain information including: (1) who is currently acting as trustee, (2) the trustee’s authority to transfer or sell the property, and (3) the current status of the trust, i.e., that it is in effect and has not been revoked. Most or all of the necessary information for the closing attorney will be located within the documents creating the trust. Oftentimes, the full trust documents are lengthy and contain many provisions that do not apply to real estate transactions. Because of this, the attorney who assisted in forming the trust will usually prepare a certificate of trust, which contains the necessary and most relevant information applicable to the trust’s assets in a condensed format. Be sure to keep this document handy and provide it to the closing attorney as soon as possible. The closing attorney will arrange for a title search and will ensure compliance with the trust documents.

Key Takeaways: In order to avoid any issues or delays, it is important to provide all of the trust information to the closing attorney as early in the process as possible. The seller/trustee should also be made aware that it may be necessary for the closing attorney to review the trust documents in full before the closing occurs or to prepare documents – so don’t pack them up in a box and load them in the moving truck!

Revolution Law Group is located in Greensboro, NC, and serves individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit Revolution.law or call 336-333-7907.

The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.