Has a loved one named you as a trustee of a trust in Memphis, Tennessee? If so, you now have the legal responsibility to manage the trust. Part of your duties is to distribute the assets when the grantor (the one who created the trust) passes away.
Real estate, in turn, is one of the most common assets in trusts. After all, most Americans regard it as the best long-term investment.
All that has likely made you wonder, “How long does a trustee have to sell a house in a trust?” It’s vital to know the answer to this question lest you want to become involved in a legal dispute.
This guide covers what you must know about selling a house in a trust, so please read on.
How Long Does a Trustee Have to Sell a House?
Under the Tennessee Probate Code, a trustee must complete trust asset distribution in accordance with the trust’s terms. Failure to do so can put the trustee at risk of liability. Beneficiaries and heirs can sue them if they don’t adhere to the trust’s distribution provisions.
Still, a trustee generally has 12 to 18 months to distribute or sell assets, including houses, in a trust. However, if the trust allows them to, they can extend this timeline. They can also withhold the assets from beneficiaries based on specific justifications.
What Can Affect the Timeframe?
Whether the trust is revocable or irrevocable can affect how long a trustee has to sell a house. So do the trust’s specific terms and beneficiary claims. Likewise, the property’s condition and if it has a lien on it can lengthen the timeframe.
Revocable trusts are the most common asset planning tool in the U.S., as they’re very flexible. They allow grantors to modify the trust while alive and competent.
For example, grantors of a revocable trust can remove or transfer more assets to the trust. They can also sell property they’ve already placed in the legal contract. They can also revise their list of beneficiaries and heirs whenever they wish to.
Beneficiaries refer to the individuals whom a grantor created the trust for. They’re the people who will benefit (hence, the term) by receiving the assets named in the contract.
In many cases, grantors of revocable trusts name themselves as their trustee. However, they also name another trustee, called a successor trustee. The latter becomes the manager of the trust when the grantor dies.
Once grantors pass away, their revocable trust becomes irrevocable. This means it’s no longer modifiable. The successor trustee must then follow the instructions outlined in the document.
One of the primary drawbacks to revocable trusts is that the properties in them can be subject to tax. Thus, a trustee must account for these legal financial duties before selling a house in a trust. For the same reason, the more properties there are, the longer a trustee may take to sell them all.
Irrevocable trusts are not modifiable without the beneficiaries’ consent. Grantors also relinquish control over their assets once included in the legal document. The upside is that, unlike those in revocable trusts, properties aren’t subject to tax.
However, a trustee can’t just distribute the assets in an irrevocable trust. They must first obtain the consent of all beneficiaries.
So, a trustee can only sell a house in an irrevocable trust if they get the green light from all the beneficiaries. If there’s a sole or a few beneficiaries, a trustee may be able to get their consent and sell the property quickly.
There are cases wherein irrevocable trusts have many named beneficiaries, though. To further complicate things, they may not be easy to contact. For example, they may live outside Tennessee or in a different country.
There are also situations wherein not all beneficiaries give their consent immediately. For instance, they may not want the house to get sold due to personal reasons.
In those scenarios, a trustee may need more than 18 months to sell a house in a trust.
The Trust’s Specific Terms
What a trustee can and cannot do should comply with a trust’s terms. So, if the document says they can only sell a house two years from the grantor’s death, then that’s what they must do. Or, if it says they must sell it and distribute the proceeds within a year, then that’s what they must follow.
In some cases, trusts can also outline the terms for staggered distributions of assets. This process involves the trustee distributing the assets over specified periods or intervals.
For example, a grantor instructs a trustee to sell all their houses at specific times. They may also specify the distribution of the proceeds to occur quarterly.
If there are many houses (and they are worth a lot), it could take a trustee years to complete the distribution.
Beneficiary Claims and Disputes
Beneficiaries can sometimes file claims or lawsuits challenging the trust document. This can happen if they believe the grantor signed the document under duress. They may allege that someone or something coerced the grantor to sign the contract.
Beneficiaries may also believe the lawyer who helped create the trust isn’t trustworthy. In this case, they may contest the document in court. Such procedures can take months, even many years, to conclude.
A trustee often can’t proceed in selling real estate property while all that is happening. This can lead to the trustee needing more than 18 months to sell a house in a trust and distribute its proceeds.
The House’s Condition
An unexpected home repair in the first year of house ownership was a problem that 77% of U.S. homeowners faced. Two in three affected homeowners spent over $1,000 for the repairs, with 3% even shelling out $10,000 or more!
Those issues can give rise to lawsuits if the house seller knew the problem and didn’t disclose it. The same can happen to trustees who sell a house knowing it’s in disrepair but fail to inform the buyer.
So, trustees must first determine if they need to repair a house before selling it. This can involve lengthy home inspections and repairs that take months to complete.
That scenario can make a trustee spend months selling a house in Memphis, TN.
Alternatively, trustees can decide to sell a house as-is, provided the trust allows them to do so. This is one of the fastest ways to sell a property in Memphis, TN, with the process often only taking days.
So, if trustees must sell a house as soon as possible, they can work with a cash buyer. This lets them liquidate the property and distribute the proceeds to beneficiaries quickly.
If There’s a Lien on the House
A lien is a legal claim or right against a house by a creditor. In such cases, the creditor is often a bank that financed the home’s purchase with a mortgage loan. However, it can also be a lender that issued a secured loan in which the security used was the house.
While it’s possible to sell homes with liens, it’s often a lengthy, complex process. For example, the seller may have to negotiate, dispute, or clear off the lien first. This can add months to the timeframe needed to prepare and sell the house.
Alternatively, sellers can partner with a cash buyer willing to take over the duty of paying off the lien. In this scenario, a trustee can sell the property for cash quickly and not have to worry about the lien anymore.
How Trustees Can Sell a House Quickly
For a typical seller, selling a house can already be stressful and time-consuming. But even more so if you are legally responsible for doing so for someone else’s benefit.
The good news is that you can sell the house to a direct cash buyer, provided the trust gives you the right. This allows you to complete the property’s sale as quickly as possible. As a result, you can distribute the home sale’s proceeds immediately afterward.
However, please do your due diligence when looking for a home-buying company. While you may want to be free of your duties ASAP, you must still act in the best interest of the beneficiaries. Therefore, you should do your best to get a fair cash offer on the house you need to sell.
Avoid settling for a sales price well below the property’s fair market value. This applies even to houses for sale that require multiple significant repairs. While you can expect a buyer to negotiate a lower price, their offer should still be reasonable.
Complete Your Trustee’s Duties ASAP
Now you know that the answer to the question, “How long does a trustee have to sell a house in a trust?” is typically 12 to 18 months. However, you also learned it can take longer based on factors such as the trust and the home’s condition.
Fortunately, you can facilitate a quick home sale if the trust allows you to. And here at We Buy Houses Memphis, we can help by buying that property for cash.
So, connect with us today. We’ll happily help you complete your duties as a trustee ASAP.