A revocable trust or living trust often becomes the preferred vehicle of choice for people who wish to disperse their worldly assets in a complex or specific manner.
This flexible instrument can offer them a plethora of advantages and safeguards. This is to guarantee that their financial requirements and preferences are efficiently satisfied both throughout their lifetime and after they pass away.
While setting up a revocable trust for real estate holding may be familiar to you. Also, you might be wondering, “How beneficial is it to sell a property held in such a trust?”
If you have researched a little bit, you might be aware that the process entails more than simply handing the property deed and receiving payment. Although selling a house held by a revocable trust can be complex. It can still streamline your property sale.
Let’s find out how and here we go!
Understanding Some Basics
Before diving deep into understanding how can a revocable trust streamline your property sale. let’s get clear with some basics.
What Is A Trust?
In a trust, assets are transferred from one person (the trust settlor/grantor) to another (the trustee), who is responsible for managing the assets. Anything from vehicles to bank accounts to valuables and real estate can be held under a trust.
The trustee manages the trust on behalf of the beneficiaries under the conditions set forth by the grantor.
What Is A Revocable Trust?
A revocable trust, (revocable living trust or RLT), is the most flexible type of trust that you can create. As long as you are competent, you can amend or revoke your trust with an RLT at any moment during your lifetime. For instance, you could sell trust property, add or remove beneficiaries, or transfer additional assets to your trust.
To enable themselves to use and manage their assets more effectively. While they are still living, many grantors choose themselves as the RLT’s original trustee. If you go this path, you should designate a successor trustee to oversee your trust if you pass away or become incapable of managing it yourself.
However, your RLT becomes irrevocable upon your death, which means it usually cannot be revoked or altered.
Usually avoiding probate is the main reason for putting assets in a revocable living trust. In the absence of a trust, your heirs may have to endure a protracted and stressful legal process to get their personal property through after your death.
Advantages Of Selling Property Held In A Revocable Trust (Before Death Of Grantor)
If you are the owner of a house in a revocable trust, selling it (as far as the legal aspects are concerned) is no issue. The trust can be altered or dissolved as you see fit. To make your choice, you have two options:
- If you hold the dual role of grantor and trustee, you have the option to sell as the trustee and retain the proceeds within the trust, or
- You can change the home’s title to your name and sell it personally, outside of the trust.
But just like with any other sale, you will have to pay capital gains taxes in both situations. But, if your circumstances allow it, you can also apply to have the capital gains tax excluded.
Advantages Of Selling Property Held In A Revocable Trust (After Death Of Grantor)
Putting your house in a revocable living trust will make it easier for your beneficiaries to sell it when you pass away.
If you didn’t have a revocable living trust, the sale of your property would involve all of your heirs equally. This implies that all decisions about the sale, including the following, would require consensus from all parties:
- They can sell a house or kept in the family.
- Whether or not to make improvements to the house to raise its worth before selling.
- Which real estate agent to work with?
- Listing price.
- What offers to accept?
Certain families might have no trouble making these choices. However, juggling these tasks appropriately while dealing with the stress and grief of losing a loved one is a challenge for a lot of family members.
The sole successor trustee under a revocable living trust can alternatively handle the property sale. By exercising their fiduciary duty, the trustee can decide on all of the aforementioned matters. Also, make sure that the sale is carried out in the beneficiaries’ best interests. Then, evenly divide the money from the sale among the heirs.
To Sum Up
From the above explanation, you can sum up the benefits of selling property under revocable trust as follows:
- You can bypass the traditional sales process, and save money on repairs, long delays, and other costs.
- Increased flexibility and control over the terms of the sale, enabling the negotiation of a desirable closing date and price.
- Beneficiaries can obtain inheritances quickly and effectively.
- The ability to allocate sale proceeds to beneficiaries’ needs and financial objectives.
- Possibility of lower tax obligations than with traditional sales.
- Privacy preservation in contrast to the public probate procedure.
- Asset protection for assets within the trust.
- Simplified procedure managed by the trustee acting in the beneficiaries’ best interests.
Whether you are the grantor or benefactor, selling a home takes time, even after resolving the legal considerations. To sell your house, you must perform the necessary improvements, stage open houses and showings, find the ideal buyer, and do other tasks. However, Elite Properties can help you sell swiftly and for top dollar.
Elite Properties maintains a reputation for transparent business practices and offers sincere guidance. Our vast network of skilled real estate agents has handled millions of dollars worth of real estate sales and purchases.
To meet your real estate needs, our team goes above and beyond the call of duty. We give our clients detailed information on how to manage various real estate matters, including real estate purchases and sales. Learn more about us.