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My aunt established a revocable living trust but did not place all of her assets in the trust. The only assets that ended up in the trust were her townhouse, worth $250,000, and one stock that has been worth about $16,000 since she obtained it. Otherwise, she has checking, savings and investment accounts outside of the trust, worth a total of $315,000. One of the non-trust investment accounts has had a loss of about $50,000 since she acquired it.
I just got back from an emergency visit to see my aunt, as her health took a sudden turn for the worse. I am the successor trustee, and will fully admit that I have not been as knowledgeable about the facts of the trust until this past weekend. I made the foolish mistake of assuming that my aunt had done what she was supposed to do, as she was quite a sharp character. I contacted the attorney who established her trust and he said he had completed the paperwork to place the townhouse and the stock in the trust, but my aunt insisted that she would follow through with the remaining assets, as she wanted to make some changes. Well, she clearly never got around to it. And the attorney was pretty cranky about being contacted and not exactly amenable to a long discussion.
During our recent call, the attorney was trying to explain to me that the investment account with the loss might be better placed within the trust. This is the crux of my question.
If my aunt survives, I will be selling her townhouse to raise money for her ongoing care costs. She has lived in the townhouse since 1968. If my aunt nets no more than $250,000 from the sale of the home while she is living, won't she avoid any type of capital gain on the house?
I have tried to research the issue raised by the attorney and the only information I can find is that, if I were able to move the investment accounts to the trust before my aunt passes away, any loss from the investment accounts can offset any capital gain from assets within the trust at the time of death, but the loss could only be used to the extent that it offsets any equivalent gain.
So I'm not sure why the attorney was concerned about the loss from the non-trust investment accounts. If my aunt passes away, won't the house have a stepped up basis as of the date of death? So how does moving the investment account, that has shown a loss, benefit the revocable trust, if the trust has not had a taxable gain?
Is there anything obvious that I am missing here? I am definitely NOT well informed on tax strategies. I hope this makes sense. I'm no spring chicken myself, and I hope I have clearly explained my conundrum.
(I know that my aunt, by not fully funding her trust, has pretty much nixed the advantage of the trust and her estate will be probated if I am unable to get named as successor trustee and move her assets to the revocable trust before her death, but that isn't my immediate concern.)
I just got back from an emergency visit to see my aunt, as her health took a sudden turn for the worse. I am the successor trustee, and will fully admit that I have not been as knowledgeable about the facts of the trust until this past weekend. I made the foolish mistake of assuming that my aunt had done what she was supposed to do, as she was quite a sharp character. I contacted the attorney who established her trust and he said he had completed the paperwork to place the townhouse and the stock in the trust, but my aunt insisted that she would follow through with the remaining assets, as she wanted to make some changes. Well, she clearly never got around to it. And the attorney was pretty cranky about being contacted and not exactly amenable to a long discussion.
During our recent call, the attorney was trying to explain to me that the investment account with the loss might be better placed within the trust. This is the crux of my question.
If my aunt survives, I will be selling her townhouse to raise money for her ongoing care costs. She has lived in the townhouse since 1968. If my aunt nets no more than $250,000 from the sale of the home while she is living, won't she avoid any type of capital gain on the house?
I have tried to research the issue raised by the attorney and the only information I can find is that, if I were able to move the investment accounts to the trust before my aunt passes away, any loss from the investment accounts can offset any capital gain from assets within the trust at the time of death, but the loss could only be used to the extent that it offsets any equivalent gain.
So I'm not sure why the attorney was concerned about the loss from the non-trust investment accounts. If my aunt passes away, won't the house have a stepped up basis as of the date of death? So how does moving the investment account, that has shown a loss, benefit the revocable trust, if the trust has not had a taxable gain?
Is there anything obvious that I am missing here? I am definitely NOT well informed on tax strategies. I hope this makes sense. I'm no spring chicken myself, and I hope I have clearly explained my conundrum.
(I know that my aunt, by not fully funding her trust, has pretty much nixed the advantage of the trust and her estate will be probated if I am unable to get named as successor trustee and move her assets to the revocable trust before her death, but that isn't my immediate concern.)