Selling a Home Held in a Trust in BC: A Guide for Families and Trustees

Selling a home that is held in a trust is different from selling a home owned in your own name, because the legal owner is the trustee, and the authority to sell comes from the trust document itself. For Greater Victoria families, this often comes up when parents who placed the family home in an alter ego or family trust are ready to downsize, or when a trustee is managing the home of someone who has passed away. This guide explains who can sell, what documents and steps are involved, how the tax rules work, and when you need a lawyer or notary.

None of this is as complicated as it sounds, but it does require care and the right professionals. The good news is that a home held in a trust can be sold through the normal Greater Victoria real estate market, and many REALTORS® handle these sales regularly. The key is knowing exactly what the trust document says before you call a listing agent.

What does it mean for a home to be held "in trust"?

A trust is a legal arrangement in which one party, called the trustee, holds property for the benefit of others, called the beneficiaries. When a home is held in trust, the trustee's name is on the title, not the name of the person who lives there. The trust document, sometimes called a trust deed or declaration of trust, sets out who the trustees are, who benefits, and what powers the trustees have.

This distinction matters at every step of a sale. The contract of purchase and sale is signed by the trustee or trustees, the proceeds are paid to the trust, and the legal transfer at closing is done by trustees who are acting under the authority of the trust document. The people living in the home may have no official role in the sale at all, even if they have lived there for decades.

The trust types that usually hold family homes

Four kinds of trusts commonly hold family homes in British Columbia, and each one behaves a little differently:

• Alter ego trust. Created by a person aged 65 or older, in which only that person is entitled to receive income or capital during their lifetime. It is often used to keep the home out of probate and to manage wealth during a longer life.
• Joint spousal trust (sometimes called a joint partner trust). Similar to an alter ego trust, but both the creator and their spouse or common-law partner share the benefit during their lifetimes. It is a common choice for couples who want the survivor protected.
• Family discretionary trust. Trustees can distribute among a group of family beneficiaries. These trusts are flexible for tax and estate planning, but the rules for the principal residence exemption are narrower for them, as explained below.
• Testamentary trust. Created under a person's will, often a spousal trust that holds the family home for a surviving spouse. The trustee may be the surviving spouse together with a trusted family member or professional.

If you are not sure which type of trust holds the home, the trust document will say. That document is the starting point for everything that follows.

Who actually has the authority to sell?

The trustee or trustees hold the authority to sell, and they must act within the powers the trust document gives them. In British Columbia, the Trustee Act also gives trustees a general power to sell property unless the trust document says otherwise, and it protects a buyer from having to investigate exactly how the sale money will be used. But the trust document comes first, and some trusts restrict or condition a sale.

A few things to know:

• Trustees generally act together. Unless the trust document says a single trustee can act alone, co-trustees make decisions jointly. A sale usually needs all of them on board.
• Beneficiaries rarely have sale power. The people who benefit from the trust are not the legal owners, so they cannot sign a listing agreement or a contract of sale just because they live in the home or hope to inherit it.
• Conflicts need direction. If trustees disagree, or if there is any question about whether a sale is proper, the matter may need to go to court for directions. A lawyer can tell you whether that is necessary or whether a signed resolution among trustees is enough.

For family members, this is often the hardest part to accept: a family home can be sold even when some family members do not want it sold, and it can also be blocked when a trustee refuses even though most of the family wants a sale. The trust document and the law govern, not the wishes of the majority. This is why our guide to executor duties and managing real estate in an estate recommends getting professional clarity early rather than assuming.

The practical steps to sell a trust-held home

Once the authority to sell is confirmed, the sale itself follows the normal Greater Victoria process, with a few extra steps:

1. Read the trust document. Confirm who the current trustees are, whether any have resigned or passed away, and whether the document requires anything before a sale, such as a beneficiary notice or a particular signing arrangement.
2. Confirm the trustees' identities and capacity. Trustees must be alive, mentally capable, and willing to act. If a trustee has died or is incapacitated, the document or the Trustee Act will say how a replacement is appointed.
3. Order a current home valuation. A REALTOR with downsizing experience can prepare a comparative market analysis, and for a home that has been held long-term, a professional appraisal is often worth the cost because an accurate starting number protects everyone.
4. List with a listing agreement signed by the trustees. The listing agreement is signed in the trust's name, by the trustees, along with a note of the trust. Your REALTOR will prepare this with you.
5. Sign the contract of purchase and sale as trustees. Your notary or lawyer reviews the trust document before closing to confirm the sale is within the trustees' powers.
6. Close through a notary or lawyer. At closing, the trustees sign the transfer in their capacity as trustees, and the net proceeds are deposited to the trust account, not to any individual. The purchaser is protected by the Trustee Act, so buyers do not need to worry that the trust is their problem.

A trust sale looks just like any other sale on the buyer's side. The extra work happens behind the scenes, with a listing agent who understands trust sales and is patient with requests for trustee signatures and documentation.

Tax considerations when a trust sells a home

The tax side of a trust sale deserves its own conversation with an accountant, because the rules changed in 2016 and they catch people by surprise. This is general information only, not tax advice.

Since 2016, the principal residence exemption for personal trusts is limited. Most ordinary family trusts can no longer claim the exemption on a home. The main exceptions are alter ego trusts, spousal or common-law partner trusts, joint spousal trusts, and certain trusts for the exclusive lifetime benefit of the settlor, plus qualified disability trusts, where the home is designated for the person who benefits from the trust. When an exemption is claimed, the trust files a form designating the property as its principal residence for the years in question.

For trusts that do not qualify, selling the family home can trigger a taxable capital gain inside the trust, because the trust is treated as having sold the property at fair market value for tax purposes. There is also the 21-year rule: a trust is deemed to have disposed of all its capital property at fair market value on each 21st anniversary of its creation, even if nothing was actually sold. A home that has grown enormously in value over decades is exactly where the 21-year rule hurts, so the timing of a sale and the trust's anniversary matter. Our article on the principal residence exemption and capital gains when downsizing covers the general rules, and a trust adds one more layer.

Property transfer tax is a separate matter. When the trust sells the home to a buyer, the buyer pays property transfer tax in the ordinary way unless an exemption applies. Transfers into or out of a trust, such as moving the home from the trust to a beneficiary, can also carry their own property transfer tax treatment in BC, so those transfers should be reviewed by a notary or lawyer before anything is signed. Our guide to downsizing tax considerations in BC walks through the related topics.

Selling while living in the home, and after death

When a homeowner who placed the family home in an alter ego or joint spousal trust decides to downsize, the sale often goes smoothly because the settlor is still alive and involved, and the trustees are usually the settlor or people they chose. The downsize proceeds stay in the trust, which can feel unusual at first: after the sale, the money is not simply handed to the homeowner. That structure is part of the original estate plan, so it should not be changed casually. If the plan is to move the money out of the trust or dissolve it, that is a conversation for the lawyer and accountant who set it up.

When the homeowner has passed away, the trustee's job continues under the trust document or the will. A home held in a trust generally does not go through probate, because the trust, not the deceased person, owns the property. That is one of the main reasons families choose a trust. But the trustee still has duties to the beneficiaries, the trust still files its own tax returns, and the 21-year rule still applies, so professional guidance matters as much after death as before. The process for selling a home in an estate in BC and the wider questions in our guide to coordinating downsizing with your estate plan will help families see how the pieces fit.

When to bring in professionals

A trust sale is not a do-it-yourself project. Before any of the practical steps above, gather three pieces of advice:

• A trust and estates lawyer or notary to confirm who can act, what the trust document requires, and whether the sale needs any court approval or beneficiary consent.
• An accountant who understands trust taxation, to model the capital gain, the principal residence exemption question, and the 21-year rule before you commit to a date.
• A REALTOR who has sold trust-held homes before, who will handle the trustee signatures, the documentation, and the trust's name on the papers without slowing the sale down. If you need help finding one, I would be glad to point you to the right people in Greater Victoria.

Frequently asked questions

Can a trustee sell the home without every beneficiary agreeing?

Usually yes, if the trust document gives the trustees the power of sale and the sale is in the beneficiaries' best interests. Approval of the beneficiaries is generally not required, though some trust documents ask for notice or consent. If the trustees disagree with each other, or there is doubt about whether a sale is proper, the trustee can ask the court for directions.

Can the person who put the home in the trust sell it themselves?

Not in their personal capacity, because the trustee owns the legal title. In an alter ego trust, the person who created the trust is often also the trustee, in which case they do the selling, but they sign as trustee. If they are only a beneficiary, they cannot sign for the trust, even if they live in the home.

Does a home held in a trust need to go through probate?

Generally no. Probate applies to assets owned by the deceased person in their own name, and a trust-held home belongs to the trust. The trust continues to own the home after death, and the trustee carries on under the trust document. Each trust is different, so it is worth confirming with the trust's lawyer how the document handles the death of a settlor or beneficiary.

Who pays property transfer tax when a trust sells the home?

The buyer pays property transfer tax on a normal purchase, subject to the usual exemptions. The transfer of the home into or out of the trust itself, such as rolling it out to a beneficiary, can have its own property transfer tax treatment in BC, so those trust-to-person transfers should be reviewed by a notary or lawyer before signing.

What happens to the sale proceeds from a trust-held home?

The net proceeds go to the trust, not to any individual, and the trustees hold and manage them for the beneficiaries under the trust document. If the plan is to distribute the money, dissolve the trust, or use the proceeds for a new home, that must be done according to the trust's terms, and ideally with the professionals who set the trust up.