1. TRUST TYPES
- Revocable Living Trust: In a revocable trust, you, as the grantor (creator) and likely the initial trustee, maintain control over the assets, including the ability to sell the property. The sale process is similar to selling it directly as an individual.
- Irrevocable Trust: With an irrevocable trust, control of the property shifts to the trustee, and potentially the beneficiaries. Selling a house in an irrevocable trust requires strict adherence to the terms outlined in the trust agreement.
- Testamentary Trust: These trusts are established through a will and become active after the grantor's death. The sale process is guided by the trust's provisions, potentially requiring beneficiary agreement, says Point.com.
2. TAX IMPLICATIONS
- Capital Gains Tax: Generally, selling a property in a trust can trigger capital gains taxes.
- Revocable Trusts: The grantor is usually responsible for capital gains taxes and may qualify for the primary residence exclusion (up to $250,000 for individuals, $500,000 for married couples) if they meet the IRS's two-year ownership and use requirements.
- Irrevocable Trusts: The trust itself is typically responsible for capital gains taxes. The primary residence exclusion usually doesn't apply to irrevocable trusts as the grantor no longer meets the ownership and residency requirements.
With the information provided above you should be able to have a general overview of the possible outcomes of this transaction. Please consult an Attorney or a Tax Attorney about the specifics of your circumstances. For instance, the lease payments, are they actual lease payments or are they installment payments. The answer to this question would have different tax consequences and you can estimate your tax liabilities in each scenario using a tax software.
Tax Calculator 2024
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