The primary goal of any trust is to protect the assets within and to provide directives as to what happens and when. There are many different types of trusts, and each has its intricacies, particularly when real estate is involved. When we are talking about trust sales, it simply means the sale of property (real estate) that happens within the legal constructs of a trust.
A trust is a legal construct that creates an entity. It has three important positions within it:
The first is the grantor – the person that is giving assets to be placed inside the trust.
These assets are to be managed by the trustee – who is the second most important position within the trust.
Ultimately, the enjoyment and benefit of those assets go to the beneficiary – which can be one person or multiple.
A trust can have many different types of assets that go in it, from life insurance to savings accounts, vehicles, to even cryptocurrency. Real property is usually the most valuable of assets within.
A trust real estate sale is the process of selling real estate that is within a trust. It is much like a typical real estate transaction in that there is a listing process, a real estate broker involved, negotiations, and closing. Yet it also has the added level of specialized knowledge of conducting the whole process within the constructs of the trust, the specific players involved, the extended time frame of the transaction, and the increased legal jargon and documentation required.
In the absence of a trust, the property goes through probate upon the death of the owner. Putting real property inside a trust will eliminate it from going through probate. This is a huge advantage for the heirs since property that goes through probate usually sells for a reduced amount. On the contrary, for a property that is placed in trust and the sale is handled with the expert guidance of trust and probate brokers, the sales value is typically higher, resulting in a higher benefit to the beneficiaries.
There are some general guidelines relating to the assets in the trust, but there are some procedural differences that you can find between the states, and California is no exception. If the trust is a “revocable trust,” the grantor can sell the real property at any time, in whichever way desired, as they are the property owners. The real property can even be sold from within the trust or outside of the trust. In an “irrevocable trust,” the sale is a bit more complicated since the trust cannot be changed without consent from the benefactors of the trust. In the event of the grantor’s passing, any trust type becomes irrevocable, and the trustee is to follow the directives of the trust document for the benefit of the beneficiaries.
Understanding the key differences between a trust and a probate real estate sale is essential, especially regarding court involvement. In a trust real estate sale, the property can be sold without court intervention, as long as the sale adheres to the directives outlined in the trust document. This process is often preferred for its simplicity and efficiency.
Conversely, a probate real estate sale in California typically requires court involvement. The extent of this involvement varies. In some cases, the court must confirm the sale, ensuring legal procedures are followed and the estate's interests are protected. Alternatively, if the estate’s representative has been granted authority under the Independent Administration of Estates Act, the sale might proceed with minimal court oversight. This act allows for more autonomy in managing and selling estate properties, potentially streamlining the probate sale process.
Understanding these differences is vital for anyone involved in the sale of real estate through trust or probate in California. Each method has its own legal requirements and processes, affecting the speed and complexity of the real estate transaction.
A well-structured trust document is crucial in real estate transactions, as it outlines detailed instructions for asset management and distribution, reducing potential conflicts among beneficiaries and trustees. Trust real estate sales typically benefit from this precision, often resulting in a quicker process compared to probate property sales, which can extend up to a year and a half.
In terms of financial returns, probate sales generally yield lower profits compared to trust real estate sales, unless managed by a brokerage firm with specialized expertise in these types of transactions. Trust sales offer the possibility of partial asset disbursements if total asset value permits, whereas probate sales often involve covering expenses before any beneficiary disbursements.
In California, the tax implications for real estate sales differ significantly between trust and probate sales. Probate sales are invariably taxed at the state rate, irrespective of the administrator's or beneficiaries' locations. Conversely, for trust sales, taxation can vary based on the beneficiaries' physical locations. Understanding these nuances is vital for anyone involved in trust or probate real estate sales in California, as they can significantly impact the financial outcome of the sale.
You may be wondering what is a trust sale without court confirmation. The great news is that a trust real estate sale in California does not require court confirmation. This means that the court does not have to supervise the sale of the property. So long as the trust is drafted correctly, the trustee can move ahead with the sale with the help of a trust and probate specialized broker for the best results and highest proceeds. This means that the time frame of the sale is substantially shortened vs. the sale during a probate case.
Still, it is a different type of sale than a regular market sale which means that having the trustee lean in and work with a brokerage firm that specializes in these types of sales is of great benefit. Particularly one with a legal background. In these trust sales, buyer contingencies are allowed, traditional financing is an option, and lower deposits are also allowed.
To understand who can sell a property held in trust, it is essential to know whether the grantor is still alive and how the trust is structured. If the grantor is still alive, and it is a revocable trust, the grantor can proceed with the decision to sell the properties since the trust can be altered at any time during the grantor’s life. That amount of liberty is not granted in the event the grantor is still alive, but the trust is an irrevocable trust. Under this scenario, there is a chance the grantor can sell the property, but if, and only if, there is consent from the beneficiaries.
When the grantor is deceased, even a revocable trust turns into an irrevocable trust, in which case the trustee must follow the instructions of the written trust document. Generally, the trustee will be in the position to sell and can freely look and choose the real estate broker unless, of course, the beneficiaries are allowed some input. The most important thing to understand is that, in that case, it is the trustee’s responsibility to manage the trust for the benefit of the beneficiaries. And although it is optional to get approval from the beneficiaries before a real estate sale, it is wise for the trustee to obtain consent prior to such a decision to avoid some potential future litigation resulting from misunderstanding or mismanagement.
For buyers who are interested in finding trust real estate sales. Although the trustee is free to sell the property by themselves, the majority and wisest decision is to work with a licensed real estate broker specializing in these intricate sales. In the event that the trustee has gone the latter route, the broker will work out a listing and marketing plan to get the property sold for the highest amount to the most vetted purchaser.
Real property that is part of a trust sale will be advertised and promoted in all the avenues the broker typically works with. It could be that it is listed in the MLS or just as part of the broker’s exclusive portfolio of properties because they have an established large group of potential buyers for those types of properties. It will all depend on the brokerage firm that the trustee decides to work with. The property is technically open to all kinds of buyers, and it is the work of the broker to guide the trustee to the best potential buyer that has been vetted and would be ideal for the deal.
The ultimate decision to sell with a specialized trust real estate agent is one that should be heavily weighted, regardless of whether the sale of the real property happens during the grantor’s life or after the grantor has passed and is in the hands of the trustee. A probate or trust real estate sale is more intricate than a regular market sale. It would be most beneficial to the trust to use a team with local real estate market knowledge and the legal capacity to handle such cases.
The CREM Group is a boutique real estate brokerage made unique by the background the founders share. Both Mark Cianciulli and Daniel Taylor have a background in real estate law, with each bringing a piece of litigation experience and real estate investment experience to the mix. Experience which they willingly share on all transactions for their client’s benefit.
With the benefit of their past experience under their belt and their top-of-the-line working real estate market knowledge of Los Angeles and Orange Country, and surrounding areas, The CREM Group is proud to have served hundreds of satisfied clients in their trust real estate sales. With a high level of expertise and the confidence to guide and advise their trust clients during complex real estate transactions while raising the bar of excellence every single time.