Trust Real Estate...

Quite often there is, as part of the Trust Estate, a home or other real property which the Successor Trustee and/or Trust beneficiaries may want to sell. There are many good reasons to sell the Trust real property as soon as possible after the Trustor passes away. There are some advantages to selling a home straight from the Trust versus waiting until the home or property has transferred from the Trust into the beneficiaries' names. If the bottom line is to sell the home or property, then its best to do so as soon as possible. Below, you will find some of the reasons why selling the Trust property soon after the death of the Trustor is a good idea.

REASONS TO SELL A HOME/PROPERTY DIRECTLY FROM THE TRUST:

Reason: Explanation:
Pay Administration Costs: There will be some administration costs which will need to be paid. If the only Trust asset is real property, then it may need to be sold in order to generate funds to pay those administration costs. These costs can range from a reasonable amount to thousands, even tens of thousands of dollars depending on who you hire to assist with that.
Pay Creditors: If there are creditors that need to be paid, and the Trust Estate is cash poor, then selling the Trust real property may be the only option in order to take care of the Trustor's creditors. The last thing wanted is a creditor attaching a lien on the Trust home or other real property as those usually continue to accrue interest. Over time, those liens can eat away at a large portion, if not all of the equity value of the Trust real property.
Ease of Distribution: It is much easlier to distribute a sum of money to the Trust beneficiares than a home or other real property. For example if you have five (5) heirs to the Estate, it would be far easier to divide the sales proceeds from the sale of the Trust home than having all five (5) heirs be placed on title as co-owners of the property. Additionally, you may have Trust beneficiaries that prefer to inherit cash instead of a partial interest in the Trust home or real property.
Less Complications By Selling The Trust Home or Real Property: There is less to go wrong during the sale of the Trust home directly from the Trust. Only the Successor Trustee's signature will be required to sell the home or property from the Trust. If you decide to transfer the Trust home or property into the Trust beneficiaries' names and then sell, it will then take the signatures and agreement of ALL of the Trust beneficiaries to then complete the sale. Think about that...all of the Trust beneficiaries would have to be in complete agreement on everything, and on every aspect of the sale. They would all have to sign off on the massive amount of real estate transaction documentation that is part of the normal real estate transaction process in California. Waiting to sell the Trust home or property until after it is transferred from the Trust into the Trust beneficiaries' names, may be a recipe for disaster.
Potential Capital Gains Tax Savings: Selling the Trust home or property soon after the Trustor has passed can potentially save the Trust beneficiaries a lot of money in terms of capital gains taxes. The Trust home or property will receive what is known as a "stepped-up" cost basis to the date the Trustor passed on. For example, if the Trustor orginally purchased the home for $100,000 and the home appreciated during his or her lifetime to a value of $200,000 at the date of passing, then the Trust beneficiaries get a new cost basis of $200,000 (value on the date the Trustor passed away). Now if the Trust home is sole soon after the Trustor passed away, say for $203,000, then the Trust beneficiaries would pay capital gains taxes on $3,000 only. However if the Trust beneficiaries held onto the home for a number of years and then sold the home, say for $300,000, then they would pay capital gains taxes on $100,000.

WHAT DOES THE PROBATE SOURCE DO THAT OTHER REALTORS, WITH LITTLE TO NO EXPERIENCE IN TRUST ADMINISTRATION, DON'T WHEN LISTING & SELLING TRUST REAL ESTATE?


As A Licensed Realtor Specializing in Trust Real Estate: As A Registered and Bonded Legal Document Assistant:
1.   Work with the Successor Trustee to help decide if selling the Trust home "as-is" or spending limited amounts of money on repairs/maintenance makes more sense in an attempt to bring in a top dollar sales price. 1.   Prepare the Notice of Sale documentaion for the sale, make sure all Trust beneficiaries receive Notice of the sale in a timely manner, and make the Title Company has copies on hand for the close of escrow.
2.   Marketing of the home not only on the Multiple Listing Service and all of the top Internet real estate sites such as Zillow, Realestate.com, Redifin, etc., but also marketing the home to local Realtors, San Francisco Bay Area Realtors, investors, and our own private list of investors that have expressed specific interest in Trust Probate homes and properties. We have a designated list of investors that have asked us to keep them apprised of Trust & Probate homes and properties that have come onto the market. 2.   Make sure that the Title Company has copies of all Trust related documenation they will need in order to close escrow on time.
3.   Make sure that all potential Buyers, their Agents and Brokers, are fully informed that the sale is a Trust sale, and not a regular real estate sale. Make sure that all potential Buyers, their Agents and Brokers, are aware of whether or not the Trustor passed in the home, and that the Successor Trustee and/or Trust beneficiaries did not live in the home and have limited knowledge on the condition of the home (if that is the case). 3.   Make sure that all public and/or governmental agencies have received notice of the Trust administration as far in advance as possible of the sale of the Trust home or real property. This is done to help ensure that if any type of claim from such an agency is coming or due, the Successor Trustee can, if he or she wishes to, arrange to have such claims paid directly from escrow from the proceeds of the Trust home sale. This is sometimes an easier way to deal with it rather than after the funds are received from the sale. It may be a lot easier to explain to Trust beneficiares that a claim was paid directly from escrow "automatcially".
4.   Work with potential Buyers and their Agents to make sure that they are fully informed that the sale is a Trust sale, and the property is being sold "as-is". Help them to undestand the nature of Trust home sales and that they should not expect the Seller (The Trust) to be willing to do much, if anything, in terms of repairs and/or maintenance to the property other than what may have been done in preparing the home to list for sale. It is important that Buyers and their Agents understand the special circumstances of the Trust home/property sales. Not properly informing the Buyer and his or her Agent of the nature of a Trust home sale can sometimes "scare" them off into the purchasing of another home which is not involved in a Trust sale. 4.   Make sure that the Seller (the Trust) has the proper taxpayer id number for the Trust in place. The Trust MUST have this in place in order for escrow to close. Many Realtors and Brokers not familiar with Trust sales miss this entirely, and it is a very important element of the real estate sale that needs to be taken care of prior to close of escrow. The Title Company must have this information in their file prior to close of escrow.
5.   When selling a Trust home or property, there are a number of exemptions that the overall real estate sale may be exempt from and not required to comply with. Most Realtors are unaware of these exemptions, and that can end up costing the seller additional time and money because of the Reator's lack of knowledge here. 5.   Make sure that the Seller (The Trust) has set up the Trust bank account, and it is ready to receive the sales proceeds from the Trust home sale. This is another unique requirement of a Trust sale, and the Title Company will not be able to wire funds into just any account. They must have a propertly set up Trust account to wire funds into.
6.   Make sure that the Seller (the Trust) receives a copy of the final, certified, statement from the Title Company after close of escrow. It is very important that the Successor Trustee of recieves a copy of this as he/she will may it for both Trust accounting and tax purposes later. 6.   Make sure that all of the applicable real property ownership change forms have been prepared and filed with the County Assessor for each county in which the Trust has existing real property. This step is often overlooked, and failure to prepare and file these forms can lead to fines levied on the Trust and/or beneficiaries from the County Assessor later.
7.   There are many other issues and variables that are unique to each Trust home/real estate sale. We make sure that any issues that come up are taken care of and resolved in a timely manner. 7.    Make sure that proper Trust related records for the entire Trust home/real esate transaction are kept and made ready for when the time comes to prepare the Final Trust Accounting. The final Trust Accounting needs to be done and provided for the Trust beneficiaries in order to help insure the Successor Trustee against possible future problems should a Trust beneficiary come forward at a later date to dispute something.

Common Questions About Trust Real Estate Sales:

  • Any Broker/Realtor can handle a Trust home sale, right?
    (Ans: Yes, but I wouldn't recommend it. There are many faucets of a Trust real property sale that takes place during the transaction which do not during a regular non-Trust sale. To hire a Broker/Agent who has little to no experience in Trust property sales and Trust administration is setting yourself up for some potential major problems.)
  • My Trust Administration Attorney takes care of selling the Probate home, right?
    (Ans: Normally No. In most cases, if you've decided to use a Trust Attorney instead of a service like The Probate Source, the sale of the Trust home or real estate is handled by an independent Broker/Agent chosen by the Successor Trustee, not the Attorney. The Successor Trustee is free to interview and choose whomever they wish to in order to place the Trust home on the market for sale.)
  • Will the Court be involved with the sale of the Trust home?
    (Ans: Normally no. One of the many reasons for having a Living Trust in place when someone passes on, is to avoid the neccessity of having to go through the Probate Court. However, there are occassions when there might be a problem, and then the Probate Court does get involved. Those usually only occur when a Trust beneficiary or other person is attempting to contest the Trust itself.)
  • When can I sell the Trust home?
    (Ans: Generally you can put the Trust home up for sale as soon as you have death certificate copies for the Trustor. This is usually anywhere from 1 to 3 weeks after the Trustor passes depending on the county and how fast they can produce the death certificate.)
  • Can the home be sold to a friend or family member?
    (Ans: Yes, but be careful with that. Often friends and family members who want to purchase the Trust home want to do so at a discount. If you do sell the Trust home at below market value to that friend or family member, be sure everyone is in complete agreement. When you sell at a discount, you are essentially taking money from the Trust beneficiares that they would have otherwise realized if the Trust home had been sold on the open market at fair market value. You as the Successor Trustee might find yourself in "hot water" at a later time from a disgruntled Trust beneficiary.)
  • What happens to the money from the sale of the home?
    (Ans: The money from the sale of the home is deposited into a special Trust account that has been previously set up specificaly for the depositing of any funds/monies that come in during the course of the Trust.)
  • A home in a Trust can't be foreclosed on, right?
    (Ans: Incorrect! A home in a Trust can be foreclosed on in the same way any home can be. There are things that can be done to try and prevent the foreclosure on a Trust home, and the Probate Source team has lots of experience working with families in this situation.)
  • Our Trust home is in foreclosure. We should just let it go back to the bank, right?
    (Ans: No! There is a lot that can be done to either: (a) pull the home out of foreclosure; (b) get the home onto the market and sell it before the foreclosure so that the Trust Estate realizes the equity remaining in the home; (c) use one of the special programs available where a family member can purchase the home; (d) perform a short sale with the home if there is little to no equity, and perhaps realize some amount of cash for the Estate via the short sale process; (e) recover the overage (if any) after the Trustee's Sale and bring that back to the Estate, or (f) some combination of these potential solutions. The Probate Source has a lot of experience working with Probate homes and properties in the foreclosure process. The key in these situations is to get moving on things quickly. The longer you wait, the less chance there is of realizing any monies for the Trust Estate and beneficiaries.

© The Probate Source 2019, William C. Hayman - Licensed & Bonded California Legal Document Assistant, Placer County Registration #16-004. NewVision Realty Group, 951 Reserve Drive, Ste 140, Roseville, CA 95678, California BRE #02000748. I (William C. Hayman) am not an attorney. I can only provide self help services at your specific direction.