Buying one person out of a property owned by a trust

[Jeffrey Fecko]

If there is a house owned by a trust and all three trustees currently have ownership of it. Is there a way to buy out one trustee without triggering capital gains taxes?

[Jeffrey Fecko]

@Colleen F. Hi Colleen,

So in this case there were three children who were trusted a house from their parents. They have collectively owned the house under the trust for about 4 years now. One of the children is looking to sell their 1/3 share of the house. One of the two remaining siblings is thinking about buying them out so that it would now be:

Sibling 1 has 2/3 share

Sibling 2 has 1/3 share

Sibling 3 has 0 share

I’m not entirely sure what kind of trust but I believe it was a living trust.

The big factor in this decision is that if it were possible to avoid any capital gains associated with buying out sibling 3 that would be ideal. My initial assumption is that the house could go to an LLC owned by sibling 1 and 2 but I assume dissolving the trust would trigger capital gains.

Is there another option?