Selling a House in a Living Trust While the Owner Is Alive

Many California homeowners hold their house in a revocable living trust so their family can avoid probate later. But sometimes the house has to be sold while the owner is still alive: to move to assisted living, to downsize or to pay for care. This guide is for owners and the spouses or adult children helping them. It covers who can sign, what changes if the owner can no longer manage their affairs and the tax and Medi-Cal questions to think through first.

When the owner can still handle it

The person who creates a living trust is often its trustee, too. While they’re alive and competent, they sell the house much as any owner would, signing as trustee. No court is involved, and unless the trust says otherwise, the beneficiaries named in it don’t get a say: while the trust is revocable and the owner is competent, the trustee’s duties are owed to the owner, not to the beneficiaries (Probate Code §15800).

The title company will want proof of the owner’s authority as trustee. A short certification of trust usually does it, without handing over the whole trust document (§18100.5).

Disclosures work much as in an ordinary sale. Trustees are generally exempt from California’s Transfer Disclosure Statement, but not when the trustee of a revocable trust is a former owner of the house or has lived in it within the past year (Civil Code §1102.2). An owner selling their own home through their trust usually fits that description, so the standard disclosure forms apply.

When the owner can’t manage it anymore

If the owner develops dementia or another condition that makes managing their affairs too hard, the successor trustee named in the trust can step in. Incapacity is established by a court or in the way the trust document specifies, which may call for statements from doctors (§15800).

At that point, the law adds protections for the people who will eventually inherit. Within 60 days of learning that no one holding the power to revoke the trust is competent, the trustee has to notify the beneficiaries who would inherit if the owner had died and give them a complete copy of the trust and its amendments. The trustee’s duty to account then runs to those beneficiaries too (§15800).

The successor trustee can then sell the house using the powers in the trust and in state law (§§16200, 16226). The trust’s terms decide how the money can be used, including for the owner’s care if the trust provides for it.

What a power of attorney can and can’t do

A durable power of attorney stays in effect if the owner loses capacity (§4124), and it can give the agent authority over the owner’s real estate (§4123). But a house in a trust isn’t owned by the owner personally; the trustee holds it. An agent can’t change or revoke the trust unless the trust document expressly allows it (§15401), and the power of attorney has to grant that authority expressly too (§4264). So for a house in the trust, the person who signs is normally the trustee, not the agent.

The power of attorney still matters if the house was never actually deeded into the trust. Then it’s in the owner’s own name, and an agent with real estate authority may be able to sell it. The current deed shows which situation applies.

If no trustee can act and there’s no usable power of attorney, the fallback is a court conservatorship. A conservator who wants to sell the conservatee’s home has to tell the court, discuss the sale with the conservatee and explain why it’s needed, including why alternatives such as in-home care won’t work (§2540).

Taxes: selling now versus later

A living trust doesn’t take away the home sale exclusion. An owner who owned and lived in the house for at least two of the last five years can generally exclude up to $250,000 of gain, or $500,000 for a married couple filing jointly who meet the rules (IRS Publication 523). Federal regulations treat the owner of a revocable trust as the owner of the house for this purpose (26 CFR §1.121-1).

There’s also a rule for owners who move into care. If someone becomes physically or mentally unable to care for themselves and lived in the home for at least 12 months of the five years before the sale, time spent in a care facility such as a nursing home counts toward the two-year residence requirement.

The trade-off is the step-up in basis. If the house is still in the trust when the owner dies, the heirs’ tax basis generally resets to its value at the date of death (Internal Revenue Code §1014). Selling during the owner’s life gives that up. For a house bought decades ago with a gain far above the exclusion, the difference can be large; for others, the exclusion covers most or all of the gain. The cost of care and of keeping up an empty house matter too. A CPA can run both scenarios, and our article on capital gains tax on an inherited house explains how the step-up works.

Medi-Cal and paying for care

If the owner is 65 or older, has a disability or lives in a nursing home, Medi-Cal’s asset rules may apply. According to the state Department of Health Care Services, Medi-Cal started counting assets on January 1, 2026. The main home doesn’t count, but cash and bank accounts do. Through June 30, 2027, the limit is $130,000 for one person, plus $65,000 for each additional person in the household. On July 1, 2027, it drops to $21,000 for one person.

For long-term care, Medi-Cal also looks back 30 months at assets given away for less than they’re worth, for transfers made on or after January 1, 2026. Selling the house can turn an asset that doesn’t count into cash that does, and selling to family for less than the house is worth can raise the transfer question. If the owner has Medi-Cal or may need it for long-term care, an elder law attorney can look at the timing and the price before a sale.

Choosing how to sell

Listing with an agent usually brings the most buyers and often the most money, but it means preparing the house and arranging showings, which can be hard while an owner is moving or unwell. A family member can buy it; Medi-Cal’s guidance says selling an asset for its full value doesn’t cause a transfer problem. If the owner has already moved out, an empty house adds its own costs and risks; our page on selling a vacant house covers those.

Selling for cash trades some of the price for speed and simplicity. EZ Home Offer buys houses across Alameda County as-is, and the family can take what matters and leave the rest. We’re real estate investors, not agents. We make a written cash offer, usually within 24 hours, charge no fees or commissions and cover typical closing costs. A cash offer is usually below full market value, so it’s worth comparing. We can close in as little as 3 days once title is clear, or later to line up with a move.

If the owner has already passed away, the steps are different. See our guide to selling a house in a living trust after a death and our inherited house page.

Sources

General information about California rules as of October 3, 2026, not legal, tax or financial advice. Laws change and every situation is different, so check the details with an attorney, CPA or other professional.