There are different reasons people place their homes in an irrevocable trust. Primarily, the goal is to protect the home, which may be the individual’s biggest asset. But what happens when such an individual needs to sell the home? Can you sell a house that is in an irrevocable trust in Tennessee? The simple answer is yes, but there are several other things you have to know if you want the deal to sail as smoothly as possible.
In this article, Aniya Equity LLC, your reliable real estate solutions company, will enlighten you about what an irrevocable trust entails, the benefits it offers, and the important things you must know about selling a home in the trust.
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What is An Irrevocable Trust?
As the name clearly suggests, an irrevocable trust is a trust that cannot be modified, revoked or terminated. This means the details of the trust cannot be altered, changed, or retracted after the agreement has been sealed. It is a sort of trust with a solid background. Ideally, it will offer the ultimate protection for your assets. For people who regard their home as their greatest assets, it can be the perfect protection for it.
Looking at the definition of an irrevocable trust above, you may feel that the phrase ‘can not be altered, changed, or retracted’ will work against you. This is not really the case if you understand what the trust is all about in the beginning. It does not completely take away your control over the property, though the trustee will have the upper hand when it comes to the most important decisions.
When Do You Use An Irrevocable Trust?
You can use an irrevocable trust to protect your home when you feel it is the best security for it. The commonest scenario, for most people, is when they or their parents are nearing retirement (or when they are in their mid-70s) and are concerned that they may have to move into an assisted living facility or nursing home. In such instances, the individual will need to qualify for Medicaid, which is the primary financer of such living facilities. Qualification for Medicaid may be hinged on a certain asset and income requirements. One of the simplest ways to meet the requirement is to place your home (which is likely your biggest asset) in an irrevocable trust.
What protection does the decision actually leave you? Well, it will protect you from losing the home. No matter how long you stay alive in the nursing home and the cost of the treatments you receive, your home will always be protected. Again, your creditors will not be able to take a house that is in an irrevocable trust.
Irrevocable trusts are also used to protect assets of beneficiaries who are under 18 years, have some disability, or are financially irresponsible as an adult. There are some specific irrevocable trusts that can be set up for certain people. Spendthrift Trust and Special Needs Trust are good examples.
Read More: How to Sell a House with Code Violations
The Major Benefits of Irrevocable Trusts
Most people put their assets in an irrevocable trust to protect them. The biggest obvious benefits are related to taxes. Since you no longer own the property, you are not responsible for paying its taxes. Your creditors will also not be able to take it, since it is no longer yours.
Do You Lose Full Control Of Your House After Placing It In Irrevocable Trust?
When you put your home in an irrevocable trust, you automatically give up ownership of the property. However, that doesn’t mean you have lost full control of what happens to the house. As the grantor, you will enjoy some level of freedom and choices when setting up the trust. This means you still have the freedom to decide what happens to your home. As the grantor, some of the changes you can make include:
- Changing the trustee
- Adding and removing beneficiaries
- Adding and removing properties from the trust
- Disinheriting a beneficiary from the trust.
Clearly, you still have some level of control over what happens to the home in an irrevocable trust.
You can watch this video on selling property owned by a trust.
Selling a Property Under Irrevocable Trust
Since we’ve discussed some of the most important things about putting a house in an irrevocable trust, it is time to revisit the original question: can you sell a home that is in an irrevocable trust in Tennessee?
The truth is, you can’t personally sell such a home since it is no longer yours. But, you can instruct your trustee to sell the home for you. There is nothing illegal or risky about it. Once you get to the point in your life that you want to sell the property, you can turn to your trustee to get the business done.
You should also know that your tax situation will be different when you sell a house that is in an irrevocable trust. You will actually enjoy some sort of tax advantage.
Tax Benefits
Remember that you will enjoy tax benefits as long as your home is in an irrevocable trust. You will enjoy even further benefits when your trustee sells such a house. Since you technically don’t own the house, it is not subject to estate tax. You will also avoid capital gain tax when your trustee sells your house on your behalf: remember, you don’t really own the house, so you haven’t really made a capital gain in the sale.
Putting your home in an irrevocable trust will help protect your assets and your beneficiary. Once you make the decision, the trust owns the house, and it is fully protected from creditors and extra taxation. While the trust can’t be easily altered, you have some level of control over what becomes of it. You can even get your trustee to sell it and enjoy more tax benefits from the sale.
While we have discussed some of the most important things you need to know about selling a house in an irrevocable trust in Tennessee above, we will still advise that you contact our real estate professionals at Aniya Equity LLC when you want to sell.
Sell Your House Fast | We Buy Houses
For a free, no-obligation consultation call: 615-669-1610, or Fill Out This Form For Your FAIR Offer
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