Yes, you can sell a house held in a trust. A trustee handles the sale much like any other real estate transaction, and because the property sits inside the trust rather than in a personal estate, the sale bypasses probate. What varies is the paperwork the title company will ask for, who signs, and how the gain is taxed. Those three things depend on whether the trust is revocable or irrevocable, whether the grantor is still alive, and what the trust document says about the trustee’s powers.
Who Has the Authority to Sell
A trustee’s power to sell real estate comes from the trust agreement. Before doing anything else, the trustee should find the section usually labeled “Powers of the Trustee” and confirm it authorizes the sale of real property. Most well-drafted trusts include broad language covering the sale, exchange, or disposition of trust assets.
If the document is silent, state law often fills the gap. A majority of states have adopted some version of the Uniform Trust Code, which supplies default trustee powers that include selling property. Where neither the document nor state law grants clear authority, the trustee can petition a court, and judges routinely authorize sales that serve the beneficiaries’ interests.
Authority alone is not the end of the analysis. A trustee owes a fiduciary duty to the beneficiaries: pursue fair market value, avoid self-dealing, and keep beneficiaries reasonably informed. Selling to yourself or a relative at a discount is one of the fastest ways to draw a lawsuit and personal liability. The duty of loyalty is among the most strictly enforced obligations in trust law.
Revocable Trust vs. Irrevocable Trust
In a revocable (living) trust, the grantor can change or dissolve the trust at will and usually serves as the initial trustee. Selling the house looks almost identical to selling personal property: the grantor-trustee lists it, negotiates, and signs. Title companies rarely push hard on authority questions because the grantor still controls everything.
An irrevocable trust is stricter. The grantor has given up control, and the trustee has to follow the trust’s rules exactly. Title companies read the trust agreement carefully before issuing title insurance, and the tax consequences are heavier.
The situation most families actually face sits between the two. A parent creates a revocable trust, transfers the house into it, and then dies. At death, the revocable trust becomes irrevocable by operation of law, and the successor trustee named in the document takes over. That successor now has both the authority and the obligation to administer the trust, which may include selling the house and distributing the proceeds. The switch also triggers important tax changes, especially a reset in the property’s tax basis.
Documents the Title Company Will Require
No title company will insure the sale, and no closing will happen, until the trustee proves legal authority to sell. Gathering these before listing avoids delays that can kill a deal:
- The full trust agreement, showing the trust’s creation, the trustee’s powers, and any conditions on property sales.
- A certificate of trust, a one-to-three-page summary that confirms the trust exists, identifies the current trustee, and describes the relevant powers without exposing private beneficiary information. Most Uniform Trust Code states authorize this as a substitute for handing over the full document.
- The deed that transferred the property into the trust, proving the trust actually owns it.
- A death certificate, if the original trustee has died and a successor is handling the sale. This establishes the chain of authority.
- Government-issued photo ID for the trustee at closing.
Common sticking points include a trust that doesn’t clearly grant sale authority, or a trustee whose name doesn’t match current records. Working through these with a trust attorney before listing saves weeks of back-and-forth with the title company.
How the Trustee Signs and Closes
The trustee signs the listing agreement, the purchase contract, disclosures, and closing documents on behalf of the trust, never in a personal capacity. Every signature block should read something like “Jane Smith, Trustee of the Smith Family Trust dated March 15, 2018.” Dropping the trustee designation can create title defects that delay or block closing.
At closing, the trustee signs a new deed transferring ownership from the trust to the buyer, and the title company records it with the county to complete the transfer.
Taxes on the Sale
Tax treatment is where revocable and irrevocable trusts pull apart, and where the real money is at stake.
The Section 121 Home Sale Exclusion
Federal law lets a homeowner exclude up to $250,000 of gain on the sale of a primary residence, or $500,000 for a married couple filing jointly, if they owned and used the home as their principal residence for at least two of the five years before the sale.1Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
If the house sits in a revocable trust and the grantor is treated as the owner under the grantor trust rules, the grantor can still claim the exclusion. The regulations say that when a taxpayer is treated as the owner of a trust holding their residence, a sale by the trust is treated as if the taxpayer sold it directly.2eCFR. 26 CFR 1.121-1 – Exclusion of Gain From Sale or Exchange of a Principal Residence The IRS has confirmed this in published guidance.3Internal Revenue Service. Letter Ruling 199912026
Irrevocable trusts generally cannot use the Section 121 exclusion because the grantor no longer owns the assets for tax purposes. For most irrevocable trust sales, the full gain is taxable.
Step-Up in Basis at the Grantor’s Death
When the grantor of a revocable trust dies, property in the trust receives a step-up in tax basis to its fair market value on the date of death. The statute covering basis of property acquired from a decedent explicitly reaches property that was transferred during life into a revocable trust.4Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent The savings can be large. If a parent bought a house for $150,000 and it’s worth $550,000 at their death, the beneficiaries’ basis resets to $550,000. Selling shortly after at that price produces little or no taxable gain.
Property in an irrevocable trust can also receive a step-up, but only if it’s included in the decedent’s gross estate for estate tax purposes. Whether it qualifies depends on the trust structure and what powers the grantor kept. Getting tax advice before listing can save beneficiaries tens of thousands of dollars.
Compressed Trust Tax Brackets
When an irrevocable trust sells property and the gain stays inside the trust rather than passing through to beneficiaries, the trust itself pays the capital gains tax. Trust brackets are severely compressed. For 2026, an irrevocable trust hits the 20% long-term capital gains rate on income above $16,250. The 0% rate covers only the first $3,300, and the 15% rate fills the middle.5Internal Revenue Service. 2026 Estimated Income Tax for Estates and Trusts – Form 1041-ES A single individual doesn’t reach the 20% rate until income exceeds roughly $500,000. When the trust terms allow it, distributing proceeds to beneficiaries before year-end shifts the tax to their individual brackets and can produce significant savings.
What Happens to the Money After Closing
Sale proceeds do not belong to the trustee personally. They go into a bank account held in the trust’s name, opened with the certificate of trust and the trust’s taxpayer identification number. A revocable trust typically uses the grantor’s Social Security number while the grantor is alive. After the grantor’s death, the now-irrevocable trust needs its own employer identification number from the IRS.6Internal Revenue Service. Publication 1635 – Understanding Your EIN
From there, the trustee manages, invests, or distributes the funds according to the trust’s instructions. Some trusts call for immediate distribution to beneficiaries. Others require the trustee to hold and invest the proceeds, distributing only income or making discretionary payments based on need. Deviating from these instructions exposes the trustee to personal liability.
Beneficiaries of irrevocable trusts have a right to an accounting. At a minimum, the trustee should keep a clear record of the sale price, closing costs, repairs, commissions, and how the net proceeds were allocated. The time to explain a questionable expense is before a beneficiary’s attorney asks about it.