Selling a House as a Trustee in New York: Authority, Steps, Taxes and Proceeds

By Albert Goodwin, Esq., New York trust and estate attorney

A trustee who holds a house in a New York trust can usually sell it. Doing so properly takes more than signing a contract. You need to confirm your authority, prove that authority to a title company, price and market the property prudently, pay the right transfer taxes, and then hold, account for and distribute the proceeds. This guide walks through each stage in the order it usually happens, with the New York statutes that apply.

This page covers the sale process. If your question is whether a trustee or beneficiary can buy the house from the trust, see our separate guide to a beneficiary buying property from a trust. A short summary of the self-dealing rule appears near the end of this page.

Who owns the house: the trust, the trustee or the estate?

Under New York law, an express trust vests legal title in the trustee, who holds it for the beneficiaries (EPTL § 7-2.1). In practice, the deed should read something like "Jane Smith, as Trustee of the Smith Family Trust dated May 1, 2015." That person, acting in that capacity, is the seller.

Before anything else, pull the current deed. If the house was never deeded into the trust, the trustee has no power to sell it. A house left titled in a deceased person's own name passes through the estate, and the executor or administrator must first obtain letters from the Surrogate's Court. A pour-over will may eventually move the house into the trust, but only after probate. See our pages on letters testamentary and what assets can go into a revocable trust.

Revocable or irrevocable, grantor alive or deceased

The kind of trust, and whether the person who created it is still living, changes who signs and what the title company will ask for.

• Revocable trust, grantor alive and serving as trustee: The grantor sells the house much as any homeowner would, signing as trustee. The grantor can also revoke or amend the trust under EPTL § 7-1.17, so beneficiaries generally have no say.
• Revocable trust, grantor alive but incapacitated: The successor trustee named in the instrument steps in, usually after satisfying whatever proof of incapacity the trust requires (often one or two physician letters). The successor trustee must act in the grantor's interest as the trust directs.
• Revocable trust after the grantor's death: The trust becomes irrevocable. The successor trustee takes over, sells the house if the trust allows or requires it, and distributes the proceeds under the trust terms.
• Irrevocable trust created during life: Trusts used for Medicaid planning or asset protection often restrict what can be done with the house or its proceeds. Read those limits closely before listing, because a sale can affect benefits eligibility or the trust's purpose.
• Testamentary trust created by a will: The trustee's authority flows from the probated will and the Surrogate's Court decree issuing letters of trusteeship.

Where the trustee's power to sell comes from

Start with the trust instrument. Most modern New York trusts contain an express power to sell real property, sometimes with conditions such as notice to beneficiaries, consent of a named person, or a requirement that the house be offered first to a family member. Those terms control.

If the instrument is silent, New York supplies default powers. EPTL § 11-1.1(b)(5) gives fiduciaries the power to sell, exchange or otherwise dispose of property they hold, at public or private sale, on terms they consider advisable. These statutory powers apply only in the absence of contrary or limiting provisions in the instrument or the court order appointing the fiduciary. A trust that says the house may not be sold during a beneficiary's lifetime overrides the default power.

The power to sell is not a license to sell at any price or at any time. Trustees must act as a prudent investor would (EPTL § 11-2.3), which includes considering the trust's purposes, the beneficiaries' needs and the costs of the transaction.

Co-trustees

If there is more than one trustee, check how the instrument says they must act. When the instrument does not address it, EPTL § 10-10.7 generally allows a majority of three or more fiduciaries to act, while two fiduciaries must act together. Title companies will typically require every acting trustee to sign the deed and closing documents, or proof that a majority action is authorized.

Step-by-step: how a New York trustee sells trust real estate

1. Read the trust and the deed: Confirm the house is titled in the trust, identify the current trustee or trustees, and find the sale power and any conditions attached to it.
2. Confirm your status: If you are a successor trustee, gather the documents that show how you became trustee: the death certificate, any resignation or declination by an earlier trustee, your written acceptance, and any incapacity letters the trust requires.
3. Secure and insure the property: Change the homeowner's policy to name the trustee, confirm coverage for a vacant house if no one lives there, and keep paying taxes, utilities and the mortgage from trust funds.
4. Get an independent valuation: An appraisal from a licensed New York appraiser, or at least broker opinions from agents with no stake in the sale, documents that the price was reasonable. If the house was inherited, a date-of-death appraisal also matters for tax basis (see below).
5. Market the property: Listing with a broker and exposing the house to the open market is the clearest evidence of prudence. A quiet sale to an acquaintance without marketing invites objections later.
6. Tell the beneficiaries what you are doing: Even when the instrument does not require consent, sharing the appraisal, the listing and the offers reduces the chance of a dispute at accounting time.
7. Negotiate and sign the contract as trustee: In New York, an attorney usually prepares or reviews the contract of sale. Sign in your fiduciary capacity, not personally.
8. Clear title: Deliver the documents the buyer's title company requests, arrange mortgage and lien payoffs, and resolve any estate tax lien issues.
9. Execute and record the deed: Sign the deed as trustee and file the transfer tax returns with it.
10. Deposit the proceeds in the trust account: Net proceeds go into an account titled in the trust's name, never into a personal account.
11. Pay expenses, report taxes and distribute: Follow the trust's distribution terms, then account to the beneficiaries.

Proving your authority to the buyer and title company

New York has not adopted the Uniform Trust Code, so there is no general statutory "certification of trust" form that title companies must accept. Each title insurer sets its own requirements. Expect to provide some combination of the following:

• A copy of the full trust agreement and all amendments, or at least the pages showing the trust's name and date, the trustee appointment provisions, the sale power and the signature pages
• The grantor's death certificate, if the grantor has died
• Documents showing the chain of trusteeship: resignations, declinations, acceptances or court orders
• A trustee's affidavit stating that the trust has not been revoked or amended in a way that affects the sale and that you remain the acting trustee
• For a testamentary trust, certified letters of trusteeship from the Surrogate's Court

Title companies may also require proof that New York estate tax has been addressed when the grantor has died, often through a Release of Lien of Estate Tax (Form ET-117) or a showing that no return was required. Property in a revocable trust is part of the grantor's taxable estate even though it avoids probate, so this issue comes up regularly. Gathering these papers before you list avoids delays at closing.

The deed and the fiduciary signature

Trust sales in New York commonly use a bargain and sale deed with covenant against grantor's acts, or a trustee's deed. Both identify the seller as trustee. EPTL § 11-1.6 requires that "all transactions by him affecting such property shall be in his name as fiduciary," so the signature block should read, for example, "John Doe, as Trustee."

Outside New York City, the deed is recorded with the county clerk along with the state transfer tax return (Form TP-584) and the Real Property Transfer Report (RP-5217). In the five boroughs, documents are filed electronically through the City Register's ACRIS system along with the city's own transfer tax return.

New York transfer taxes on a trustee's sale

A sale by a trustee is taxed like any other sale for consideration. Rates below reflect current law. Confirm them with your closing attorney, because thresholds and rates are periodically amended.

• New York State real estate transfer tax: $2 for each $500 of consideration (0.4%) under Tax Law § 1402. In New York City, a higher rate applies to residential sales of $3 million or more. The seller customarily pays this tax, although the contract can shift it.
• New York City Real Property Transfer Tax: For residential one-to-three-family houses, condos and co-ops, 1% when the price is $500,000 or less and 1.425% above that. The seller customarily pays.
• Mansion tax: The buyer pays 1% on residential purchases of $1 million or more under Tax Law § 1402-a, with graduated higher rates for expensive New York City properties. It does not come out of the trust's proceeds, but it can affect what buyers will offer near the threshold.
• Local taxes: Some localities impose their own transfer taxes, such as the Peconic Bay region towns on the East End of Long Island.

Income tax: basis, capital gains and who reports the sale

Income tax often matters more than transfer tax, and the answer turns on the type of trust.

• Revocable trust after the grantor's death: Property held in a revocable trust is included in the grantor's gross estate, so it generally receives a stepped-up basis equal to fair market value at the date of death under Internal Revenue Code § 1014. A sale soon after death at about that value often produces little or no taxable gain. Get a date-of-death appraisal to document the basis.
• Revocable trust during the grantor's life: The trust is a grantor trust for income tax purposes. The sale is reported on the grantor's own return, and the grantor may qualify for the home sale exclusion if the usual ownership and use tests are met.
• Irrevocable trust: Many irrevocable trusts keep the grantor's original basis, which can mean a large gain. Whether a step-up is available depends on how the trust was drafted and whether the property is included in the grantor's estate. Have the trust's accountant review this before you set a price.

Non-grantor trusts report sales on federal Form 1041 and the New York fiduciary return (IT-205). Capital gains are usually taxed to the trust unless the trust terms or a final-year distribution carry them out to the beneficiaries. Trusts reach the top federal tax bracket at a low income level, so the timing of distributions can matter. You may also need to make estimated tax payments after the closing.

Mortgages, liens and reverse mortgages

Order payoff letters early for any mortgage, home equity line or judgment lien. Transfers into a revocable trust generally do not trigger a mortgage's due-on-sale clause, but a sale to a third party does, and the loan is paid from the closing proceeds. With a reverse mortgage, the lender usually demands repayment after the borrower dies and allows a limited period to sell. Contact the servicer promptly to learn its deadlines and avoid a foreclosure filing.

When a beneficiary or relative lives in the house

An occupant can stall a sale. The trust instrument may give a beneficiary a right to live in the house, in which case the trustee may not be able to sell without that person's agreement or a court order. If there is no such right, the trustee may need to negotiate a move-out date, charge use and occupancy, or start a removal proceeding. We cover those options in detail on our page about a beneficiary living in an inherited house. If a sibling wants to keep the house instead of selling, see buyouts of an inherited residence.

Co-ops versus houses and condos

A trust that owns a co-op apartment holds shares and a proprietary lease, not a deed. Selling it requires the co-op board to approve the buyer, and many buildings charge a flip tax and require their own transfer forms. Some boards also limit or refuse ownership by trusts, which can matter if a beneficiary wants to take the apartment in kind. State and city transfer taxes still generally apply to co-op sales. Condos and houses are conveyed by deed, although condos may have a right of first refusal that the board must waive.

When to ask the court for advice and direction

Most trustee sales close without court involvement. You should consider asking a court for instructions before selling when:

• The trust language on the power to sell is ambiguous
• Beneficiaries strongly object, or some are minors or incapacitated and cannot consent
• The proposed buyer is the trustee, a co-trustee or a relative of the trustee
• A beneficiary claims a right to occupy the house
• The sale price is well below appraised value because of the property's condition or market conditions

For a testamentary trust, the Surrogate's Court can give advice and direction under SCPA § 2107. For a lifetime trust, a trustee may petition the Surrogate's Court or proceed in Supreme Court under CPLR Article 77. A court order adds time and cost, but it can protect a trustee in a contested family.

Selling to yourself or a family member: the self-dealing rule in brief

A fair price alone does not make a trustee's purchase of trust property safe in New York. The state follows a strict rule against fiduciary self-dealing, applied by the Court of Appeals in Matter of Rothko, 43 N.Y.2d 305 (1977). A trustee's purchase of trust property is generally voidable at a beneficiary's option, regardless of price, unless one of the following applies:

• The trust instrument expressly authorizes the transaction
• All beneficiaries are competent adults and each gives informed written consent after full disclosure
• A court approves the sale in advance

Sales to a trustee's spouse, child or business deserve the same caution. A trustee who takes trust property for personal benefit can face removal, surcharge and liability for legal fees. Where intent to steal is shown, the matter can also be referred for criminal prosecution under the larceny statute, Penal Law § 155.05(1). For a full discussion, see beneficiary buying property from a trust and breach of trust.

Handling the proceeds and closing out the trust

EPTL § 11-1.6 requires a fiduciary to keep trust property separate from personal property. The closing check or wire goes into a trust account. From there, the trustee may pay legitimate trust expenses, such as closing costs, taxes, insurance, repairs and professional fees, and then follow the trust's distribution terms. Some trusts direct immediate distribution. Others require the trustee to keep proceeds invested for a beneficiary over time.

Before making a final distribution, prepare an accounting that shows what the trust received, what it spent and how each beneficiary's share was calculated. Many families use an informal accounting with a receipt and release signed by each beneficiary. When beneficiaries will not sign, or when minors are involved, a judicial accounting settles the trustee's liability. Our accounting attorneys handle both.

Hypothetical example: a sale from listing to distribution

The following is an illustration, not a description of any client matter. A mother's revocable trust owns a two-family house in Queens. She dies, and her son becomes successor trustee for himself and his two sisters. The trust allows the trustee to sell real property and directs equal distribution.

• Weeks 1 to 4: The son confirms the deed is in the trust's name, signs an acceptance of trusteeship, obtains death certificates, opens a trust bank account with a tax ID number, and updates the insurance.
• Weeks 4 to 8: He orders a date-of-death appraisal, gets two broker opinions, and sends copies to his sisters. One sister lives in the downstairs unit and agrees in writing to move out by a set date.
• Weeks 8 to 16: The house is listed, offers come in, and he shares them with his sisters before accepting the highest qualified bid. His attorney prepares the contract, which he signs as trustee.
• Weeks 16 to 26: The buyer's title company reviews the trust, and the estate tax lien issue is addressed. The deed and transfer tax returns are signed and filed at closing, and net proceeds are wired to the trust account.
• Afterward: The son reserves funds for the trust's final tax return, prepares an informal accounting, collects signed releases, and distributes the balance in three equal shares.

Actual timing varies widely with the market, title issues, occupants and family cooperation.

Trustee's pre-sale checklist

• Current deed showing title in the trust
• Complete trust agreement and all amendments
• Death certificate and successor-trustee documents, if applicable
• Co-trustee signatures or proof of majority authority
• Independent appraisal or broker opinions
• Mortgage, lien and reverse mortgage payoff letters
• Estate tax lien release or proof none is required
• Plan for any occupant
• Co-op board package or condo waiver, if applicable
• Trust bank account and tax identification number

Frequently asked questions

Do beneficiaries have to approve a trustee's sale of a house in New York?

Usually not, if the trust or EPTL § 11-1.1 gives the trustee the power to sell and the instrument does not require consent. Beneficiary consent becomes necessary when the trustee has a conflict of interest, such as buying the house personally, or when the trust itself requires approval.

Does a trustee need court approval to sell a house in NY?

Not in most cases. A trustee with a valid power of sale can sell without a court order. Court approval is advisable, and sometimes necessary, when the power is unclear, the buyer is related to the trustee, or beneficiaries who cannot consent are affected.

Can a trustee sell below the asking price?

Yes. Asking price is a marketing number, not the legal test. The question is whether the trustee acted prudently: getting a reliable valuation, exposing the property to the market and accepting a reasonable offer. A price well under appraised value should be documented with reasons, such as condition or lack of offers.

Can a successor trustee sell the house after the grantor dies?

Yes, if the house is titled in the trust and the trust permits a sale. The successor trustee will need to show the title company the death certificate and the trust provisions naming them. If the house was never transferred into the trust, it must go through the estate first.

How long does a trustee have to sell a house?

New York law sets no fixed deadline. The trust may set one, and the duty of prudence means a trustee should not let a vacant house deteriorate or carry costs indefinitely without reason. Beneficiaries who believe a trustee is delaying unreasonably can petition the court to compel action or an accounting.

Can the trustee keep the sale proceeds in a personal account until distribution?

No. EPTL § 11-1.6 requires trust funds to be held separately and in the trustee's name as fiduciary. Commingling trust money with personal funds is a breach of duty even if no money is lost.

Talk with a New York trust attorney

We help trustees prepare houses and co-ops for sale, answer title company requirements, address occupant and beneficiary disputes, and close out trusts with proper accountings. We also represent beneficiaries who have questions about how a trustee is handling a sale. Learn more about our New York trust practice or call Albert Goodwin, Esq. at (212) 233-1233.

This page provides general information about New York law and is not legal advice for any specific situation. Statutory rates and requirements change, so confirm current law with an attorney before acting.