Every seller asks some version of the same question during closing prep: where does my money actually go, and does it have to sit in some kind of trust first? It’s a fair question, and it usually comes from a place of confusion rather than concern, because the word “trust” gets used two completely different ways in a real estate transaction.
One meaning is a revocable living trust, which is an estate planning tool. If your house is titled in the name of a trust, you’re using that structure to control what happens to the property later, whether that’s during your life or after you pass it on. Not everyone sets one of these up. Plenty of homeowners in Ypsilanti, Ann Arbor, Belleville, and Van Buren Township sell homes titled in their own name, no trust involved at all.
The other meaning is a trust account, sometimes called an escrow account. This has nothing to do with estate planning. It’s a regulatory requirement. In Michigan, title companies and real estate brokers are required by law to hold client funds, including earnest money and closing proceeds, in a dedicated trust or escrow account while a transaction is in progress. That rule applies to every closing, whether the seller owns the home individually, jointly, or through a trust.
So here’s the direct answer: yes, your proceeds pass through a trust account at closing, but not because of how you hold title. It’s simply how the money moves. The title company collects the buyer’s funds, pays off your mortgage and any other liens, covers closing costs, and then wires or issues a check for what’s left over, your net proceeds. All of that happens inside a trust account because the law requires it, not because your house is in a trust.
Once that money is disbursed to you, it’s yours. There’s no requirement that it stay in any trust account afterward. What you do with it next, whether that’s paying off debt, buying your next home, investing it, or setting it aside, is entirely your call. If you’re weighing whether to move that money into a revocable trust as part of a larger estate plan, that’s a separate decision worth having with an estate planning attorney rather than figuring out on your own.
This mix-up trips people up more than it should, mostly because the word “trust” is doing two different jobs. One is about how your home is titled. The other is about how funds are handled during the sale. They don’t depend on each other. You don’t need a revocable trust to have your proceeds pass through an escrow trust account, and having a revocable trust doesn’t change where your proceeds end up after closing.
If you’re getting ready to sell in the Ypsilanti, Belleville, Van Buren Township, or Ann Arbor area and want to know exactly how your proceeds will be handled at closing, that’s a conversation worth having early, not on closing day. I’m happy to walk you through what to expect.
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