HW "Skip" Weldon wrote:
- quote -

Either a living trust (made while the creator is alive) or a
testamentary trust (created by a Will) can accomplish that
goal.

Stu

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Stuart Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

I assume that when you speak of eliminating the marital
penalty you are thinking of a testamentary trust, not a
living trust. Correct?

-HW "Skip" Weldon
Columbia, SC

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Herb Smith wrote:

- quote -

Even in California, when transferring property to children a
trust is the only way both to avoid probate and obtain
stepped up basis in capital assets.

It's not necessary to use a trust when merely transferring
property from one spouse to another. But without a trust,
what I refer to as the marital penalty in the estate tax
cannot effectively be avoided.

Stu

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Herb Smith wrote:

- quote -

Hmmm... That's a fairly strong statement. Like anything, it
depends on the circumstances. <g
MTW

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michaeljc70[at]hotmail.com (MC) wrote:

- quote -

If you mean the usual kind of living trust, this is a
species of grantor trust. A grantor trust doesn't affect the
IRS's view of who owns the property, because the trust is
revocable, and you're free to take the property back from
the trust at any time, sell the property and take the
proceeds from the trust, and so forth.

So as far as the IRS concerns, you still own the property
through the trust, and you still get all the tax benefits.

Living trusts are especially popular in states that have
high real estate prices and byzantine probate laws (read,
California), but they would be useless if the tax
consequences were to disqualify the capital gain exemption
and the deductibility of mortgage interest and property
taxes.

Now if you put the property in an irrevocable trust such as
a Medicaid trust, that might blow the tax deductions and the
exemption. Get definitive professional advice before doing
anything like that.

--
Chris Green

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michaeljc70[at]hotmail.com (MC) wrote:

- quote -

A revocable inter vivos, or living, trust is not treated for
income tax purposes as an entity separate from its grantor
during the grantor's lifetime. Everything that is in the
trust goes on the grantor's individual income tax return
just as if he or she owned the trust property directly.

The trust is not an income tax reducing vehicle; it is
generally established in order to avoid probate at the
grantor's death.

Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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MC wrote:

- quote -

If the living trust is considered a "grantor trust", then
there is no tax effect whatsover. Both (1) and (2) apply.
In almost all circumstances, if you (the grantor) has the
power to withdraw items from the trust, it will be
considered a grantor trust, but you may want to run the
trust documents past a tax specialist.

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C wrote:

- quote -

A living trust (revocable trust) has no affect on personal
income taxes as it is a grantor trust. I.e., the grantor is
taxed as if the trust did not exist.

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"MC" <michaeljc70[at]hotmail.com> wrote:

- quote -

A living trust is usually considered a grantor trust,
meaning it is zero effect on your income taxes.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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michaeljc70[at]hotmail.com (MC) wrote:

- quote -

Living Trusts are revocable and transparant. None of the
above are affected by them. You still get property tax
homestead exemptions, etc and all IRS and State tax
deductions.

ed

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MC wrote:

- quote -

First of all, are you talking about a revocable living
trust, or an irrevocable living trust? That will make a
huge difference. I will assume you are talking about a
revocable trust, since that is the most common.

- quote -

Stays the same as if you still owned the property.

- quote -

Same as if you still owned the property.

The thing to be careful of is what happens after the trust
becomes irrevocable. Real estate in such a trust can result
if your spouse not being able to qualify for the $250,000
exemption.

Stu

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michaeljc70[at]hotmail.com (MC) wrote:

- quote -

As far as the IRS is concerned, the living trust is a disregarded
entity for tax purposes. The LT, as a grantor (revocable) trust,
operates under your SSN, not an EIN, so it is transparent to the IRS.
1 - The property taxes and mortgage interest are still deductible in
the LT, as they were previously.
2 - You are still eligible for any Section 121 exclusion on sale.

A Living Trust is primarily an estate planning tool (probate
avoidance) and has little effect on your personal taxes. Except in
some states, like CA, the trust is a waste of time and money.

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michaeljc70[at]hotmail.com (MC) wrote:

- quote -

As far as the IRS is concerned, the living trust is a
disregarded entity for tax purposes. The LT, as a grantor
(revocable) trust, operates under your SSN, not an EIN, so
it is transparent to the IRS.

1 - The property taxes and mortgage interest are still
deductible in the LT, as they were previously.
2 - You are still eligible for any Section 121 exclusion on
sale.

A Living Trust is primarily an estate planning tool (probate
avoidance) and has little effect on your personal taxes.
Except in some states, like CA, the trust is a waste of time
and money.

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How does transferring a home into a living trust affect my
personal income taxes from the following perspectives:

1) tax deductibility of property taxes and mortgage
interest.

2) $250K exemption won capital gain when you sell after
living in the home 2 out of 5 years

I would assume 2) is out since you technically don't own the
home. 1) I would think still applies if you pay the mortgage
and taxes personally even though you don't technically own
the home.

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