My mother had a revocable trust; she passed away in June this year; the trust is irrevocable now and I am the trustee. We sold her primary residence ($350,000) and distributed funds from it to beneficiaries as directed in will. Each person received less than $50,000. Will taxes need to be paid by trust ? Thanks for your input
There likely will be no taxes due. if you mother had less than $5.2MM in assets there would be no estate tax due and beneficiaries get a step up in basis at death so no capital gain would be due if the house was sold close to the time of death or you can elect a later date if needed for valuatIon. Have an attorney or CPA confirm since we don’t have all facts here. Hope this helps.
Dave Rich is an attorney licensed in Colorado. Answering your questions does not create an attorney-client relationship between us. You should speak with an attorney to whom you have provided all the facts in your case, before you take steps that may impact your legal rights. I am not obligated to answer subsequent emails or phone calls unless you have hired me. I wish you the best of luck with your situation.
I am sorry for your loss of your mother. Since the trust became irrevocable, the Trustee would normally pay any capital gains taxes due on the sale of the home. However, you distributed the funds to the beneficiaries (leaving the trust with no money) and that carried out the capital gains income to them. Thus, you will need to issue a K-1 to each of the beneficiaries showing their share of the capital gains tax (if any). There may be other tax implications here, as well. Thus, please consult with an experienced Colorado fiduciary accountant or tax attorney. Good luck to you.
This information is presented as a public service. It should not be construed to be formal legal advice nor considered to be the formation of a lawyer/client relationship. I am licensed in Connecticut and New York and my answers are based upon the law in those jurisdictions. My answer to any specific question would likely be different if I were to review a client's file and have the opportunity to interview the client. Accordingly, I strongly urge you to retain an attorney in your jurisdiction with respect to any legal matter.
I agree with Joseph in respect to how capital gains taxes would be paid if there are any. The question to first ask is: are there any capital gains taxes at all? The positive difference in fair market value on the property from June 2017 to date of sale would be the portion capital gains tax is due on.
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