How Long Can A House Stay In A Trust After Death?

How long can a house stay in a trust after death?

In this article, you’ll learn about:

how long a house can stay in a trust after the grantor dies
what happens to the house in a trust
how to sell a house in a trust after the grantor passes
how to handle the money from the sell of the house
what taxes you’re going to have to pay
how to transfer the house out of the trust instead of selling
how long it takes to settle a trust

Let’s dig in.

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How Long Can A House Stay In A Trust After Death?

How long a house can stay in a trust after death depends on a few things, like:

Type of Trust: If it’s a revocable living trust, the house will typically be distributed to the beneficiaries or sold and the proceeds distributed as soon as reasonably possible after the grantor’s death, according to the trust’s terms and after any debts and taxes are paid.
Trust Terms: The trust document itself will have specific instructions and provisions. Some trusts are established to hold assets for a long time, potentially for several generations, especially in the case of dynasty trusts.
Reason for Holding: In some cases, the trust may have provisions to hold the property for the benefit of beneficiaries. For instance, a trust could stipulate that a house is to be held in trust until a beneficiary reaches a certain age, or for the lifetime of a beneficiary, with instructions on what should happen afterward.
Taxes and Regulatory Issues: Some jurisdictions may have rules related to perpetuities that prevent trusts from lasting indefinitely. The “rule against perpetuities” is a legal principle in some jurisdictions that dictates how long a trust can exist before its assets must be distributed. The specifics of this rule can vary by jurisdiction.
Trustee Discretion: In some trusts, the trustee might have discretion regarding when to sell or distribute the property, especially if the sale or distribution is in the best interests of the beneficiaries.
Outside Pressures: Beneficiaries might have the right to request distributions or even terminate the trust under certain circumstances, depending on the trust terms and local laws.

In general, there isn’t a fixed time limit on how long a house can remain in a trust after death.

How long a house can stay in a trust after death depends on:

the terms of the trust
the wishes of the grantor
the needs and rights of the beneficiaries
applicable laws

Let’s say you have specific questions about a trust and real estate within it.

It would be wise to consult with an estate planning attorney or trust lawyer in your area.

Fill out the form on this page to get in touch with our estate planning lawyers.

What Happens To House In A Trust After Death?

Let’s say the grantor (the creator of the trust) dies and a house is in that trust.

Here’s what happens to the house in the trust after the grantor’s death:

Successor Trustee Takes Over: If the grantor dies or becomes incapacitated, a successor trustee steps in. Their job is to manage the trust for the beneficiaries’ benefit.
Notification and Listing: The trustee informs relevant parties about the grantor’s death. They also list out all trust assets, including the house.
Paying Off Debts: The trustee settles the deceased’s debts, which can include bills, loans, and taxes. If needed, they might sell the house or other assets to cover these.
Asset Distribution or Management: The trustee transfers the house to a beneficiary if that’s what the trust instructs. If the trust orders the sale of the house, the trustee sells it and distributes the money as per trust guidelines. Sometimes, the trust might keep the house for beneficiaries.
Handling Costs: If the house isn’t sold or given to a beneficiary right away, the trustee handles its upkeep and expenses using trust funds.
Ending the Trust: Once all assets are distributed and duties are fulfilled, the trust can end. However, some trusts are set up to last much longer, even across generations.
Keeping Records: Trustees must show beneficiaries a report on how they managed and distributed trust assets, including details about the house.

Selling A House In A Trust After Death

When a person puts a house in a trust, the trust outlines what should happen to that house after they die.

Here’s how to go about selling a house in a trust after the death of a grantor:

Identify the New Manager: Find out who the successor trustee is. This person, named in the trust, takes charge after the original owner’s death.
Read the Trust Rules: The successor trustee needs to read the trust document. It tells them if and how the house should be sold.
Get Proof of Death: Obtain a death certificate for the deceased person. Many parties involved in the sale will ask for this.
Find Out the House’s Worth: Hire a professional to appraise the house. This gives you a good idea of the selling price.
Pay Any Debts: If there are any debts or bills tied to the house, use the trust’s money to pay them off.
List the House for Sale:
- Pick a Real Estate Agent: Choose someone who knows how to sell houses from trusts.
- Prepare the House: Fix any issues and make it look appealing to buyers.
- Decide on a Price: With the agent’s advice, set a price based on the house’s appraised value and market trends.
- Close the Deal: Review buyer offers, pick the best one, and finalize the sale.
Handle the Money: Once the house sells, put the money back into the trust. Then, distribute it as the trust instructs, like sharing it among family members.
Deal with Taxes: There may be taxes due after the sale. Make sure these are paid using the sale’s proceeds or the trust’s money.
Keep a Record: Write down every step you take and the money you spend or receive. This ensures clarity and transparency for everyone involved.

What Happens To The Proceeds From Sale Of House In Trust?

After the house in a trust gets sold, what happens to the money?

Here is what happens to the money from the sale of a house in a trust:

Into the Trust’s Account: Initially, the proceeds from the sale are deposited into the trust’s bank account. They don’t go to an individual’s personal account unless specified by the trust.
Payment of Debts and Obligations: Before any distribution to beneficiaries, the trustee must use the trust assets (including the sale proceeds) to pay any debts, obligations, taxes, or expenses related to the property or the trust itself.
Distribution to Beneficiaries: After addressing debts and obligations, the trustee distributes the remaining proceeds to the trust’s beneficiaries according to the terms set out in the trust document.
Reinvestment: Depending on the trust’s terms, the trustee may reinvest the proceeds into other assets for the trust. This is common in trusts meant to last for a long time or to provide ongoing benefits to beneficiaries.
Ongoing Trust Maintenance: If the trust continues after the sale, the trustee uses the proceeds (or the earnings from reinvested proceeds) for trust purposes, like administrative expenses or other specified activities.
Special Conditions: Sometimes, trusts have unique terms or conditions. For example, proceeds might only be distributed to beneficiaries once they reach a certain age or achieve a specific milestone, like graduating from college.

Tax Implications Of Selling A House In A Trust After Death

After you have sold a house in a trust, you have to pay taxes.

Here are the tax implications of selling a house that’s in a trust after the grantor’s death:

Step-Up in Basis: Houses in trusts often benefit from a “step-up” in tax basis. This means the property’s tax basis adjusts to its market value at the owner’s time of death. If sold soon after at a similar price, capital gains tax could be minimal or none.
Capital Gains Tax: If the house’s value grows after the owner’s death, selling it can lead to a capital gain. The trust pays capital gains tax on the difference between the new value and the stepped-up basis.
Trust’s Income Tax: Trusts have their own tax rules. They might hit top tax rates with limited taxable income. If a trust keeps the sale proceeds and earns from it, like from investments, it can face high tax rates.
Distributable Net Income (DNI): Trusts can distribute sale proceeds to beneficiaries. If so, beneficiaries pay the tax, often at a lower rate than the trust.
Estate Tax: Large estates may face federal estate tax. This includes the house’s value. But, many estates fall below the tax-exempt limit.
State Taxes: Some states have their own estate or inheritance taxes. They may also have unique capital gains tax rules. Always check local laws where the property is.
Primary Residence Exclusion: Trusts with the owner’s main home might get capital gains tax exclusions. But, it’s complicated for trusts.

How To Transfer Property Out Of A Trust After Death

Maybe you want to transfer the property out of the trust instead of selling it.

Here’s how to transfer property out of a trust after the death of a grantor:

Read the Trust: Start by reading the trust document. This tells you who takes over (the successor trustee) and who gets the property (the beneficiaries).
Become the Trustee: If you’re the named successor trustee, you’ll handle the trust’s property and assets.
Get a Death Certificate: Secure a copy of the grantor’s death certificate. You’ll need it for some steps.
Tell the Beneficiaries: Inform beneficiaries of the grantor’s death and your role as trustee.
List Trust Assets: Make a list of everything the trust owns, including the property.
Pay Off Debts: Before giving out assets, settle the grantor’s bills, debts, and taxes.
Check Property Title: Ensure the property’s title is in the trust’s name.
Value the Property: If needed, get an appraisal to find out the property’s market value.
Prepare to Transfer:
- Make a New Deed: Create a “trustee’s deed” to move the property from the trust to the beneficiary.
- Sign in Front of a Notary: Sign the deed, with a notary present.
- File the Deed: Record the deed with the local county office, making the transfer official.
Report to Beneficiaries: Show beneficiaries a report of all trust activities, like sales and distributions.
Finish Your Duties: Once everything’s transferred and tasks are done, your trustee duties end.

FAQs About How Long Can A House Stay In A Trust After Death

These are common questions our clients ask us related to how long a trust can stay in a house after death.

How Long Does It Take To Settle A Trust After Death?

On average, settling a trust after death typically takes between 6 months to 18 months.

However, this can vary widely based on the specific circumstances and complexities of the trust.

Here are things that affect how long it takes to settle a trust after death:

Size and Complexity of the Trust: A straightforward trust with a few assets might be settled quickly, while a larger, more complex trust with diverse assets can take longer.
Trust Terms: Some trusts have specific terms that require certain actions before assets can be distributed, like waiting for a beneficiary to reach a particular age.
Debts and Taxes: The trustee must ensure all debts, bills, and taxes of the deceased are paid before distributing assets. This can add time, especially if assets need to be liquidated to cover debts.
Real Estate and Other Assets: If the trust includes real estate or other significant assets that need to be sold, the time it takes to sell can extend the trust settlement process.
Beneficiary Disputes: If beneficiaries disagree about the trust’s terms or the trustee’s actions, resolving these disputes can delay the process.
Legal or Financial Complications: Sometimes, unexpected legal or financial issues arise that need resolution before the trust can be settled.
Reporting and Record Keeping: The trustee might need to provide a detailed accounting of the trust’s assets and distributions, which can take time.
Location and Number of Beneficiaries: If beneficiaries are spread out geographically or if there are many beneficiaries, coordinating communications and distributions can take longer.
Local Laws and Regulations: Some jurisdictions have specific rules and timeframes for certain trust-related activities.
Probate: If any assets were mistakenly left out of the trust and have to go through probate, this can also add to the timeframe.

How Long Can A Trust Remain Open After Death?

On average, a trust can take about 12 to 18 months to settle after the death of the individual who established it.

However, this timeframe can vary significantly based on the factors mentioned previously.

In some cases, especially when there are no complications, it might be shorter, taking just a few months.

In more complex scenarios or when disputes arise, a trust can remain open for several years.

How Long Can You Keep An Estate Open After Death?

The average time that you can keep an estate open after death is 2 years.

94% of states allow an estate to stay open for 2 years after someone’s death.

But the executor or administrator can file extensions.

The courts will grant extensions for estates that need them.

Hiring A Trust Attorney

If you want help from a trust law firm, fill out the form below.

At The Hive Law, we understand the importance of:

protecting your hard-earned assets
ensuring your family’s future
not losing everything to creditors and lawsuits
properly (and legally) distributing assets

We only accommodate a limited number of clients each month.

So don’t miss your opportunity to work with our trust fund lawyers.

Benefits of our trust services:

Tailored solutions to fit your unique needs and goals
Expert guidance in navigating complex tax and legal matters
Preservation of your wealth for future generations
Streamlined asset distribution according to your wishes

Avoid the pitfalls of inadequate estate planning strategies:

Creditors seizing your assets
Lawsuits jeopardizing your family’s financial security
Family disputes over inheritance
Costly and time-consuming probate processes

Talk soon.

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How Long Can A House Stay In A Trust After Death?

Table of Contents

The Hive Law Has Been Featured In

Get A FREE Consultation!

How Long Can A House Stay In A Trust After Death?

What Happens To House In A Trust After Death?

Selling A House In A Trust After Death

What Happens To The Proceeds From Sale Of House In Trust?

Tax Implications Of Selling A House In A Trust After Death

How To Transfer Property Out Of A Trust After Death

FAQs About How Long Can A House Stay In A Trust After Death

How Long Does It Take To Settle A Trust After Death?

How Long Can A Trust Remain Open After Death?

How Long Can You Keep An Estate Open After Death?

Hiring A Trust Attorney

Get A FREE Consultation!

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