Selling inherited home - tax implications

[cyke68]

What is the name of your state (only U.S. law)? VA

Hello,

My grandmother established a revocable living trust for estate planning purposes in 2006. She passed away in July of this year. I am her sole beneficiary and successor trustee (and personal representative as named in her pour-over will, should it be pertinent).

According to public records, the homeowner is currently identified as [GRANDMOTHER'S NAME], TRUSTEE. This has been the case since 2006, shortly after the creation of her trust. What I'm wondering is:

In my capacity as successor trustee, would I encounter substantial obstacles (i.e. anything above producing documentation I already have such as the trust documents, death certificate, and substantiating my identity/authority) selling the home as-is? Might it be necessary to re-title the home at this time?

If I am able to sell the home as it is currently titled: is that advisable from a tax perspective? I of course want to reduce any capital gains tax as much as possible. I do not intend to reside in or rent the home. I understand there is a "step up in basis" rule that can be advantageous, but I'm not sure if it applies due to recent legislative changes and the nature of this transaction. Am I able to use the fair market value of the home at the time of my grandmother's death as my basis? Or is that off the table unless the home is passing directly to me (instead of going through the trust)? Again, wondering if re-titling might be advisable (and if it's really as simple as that).

I know I will need to consult with a real estate attorney/tax professional as to the specifics, but it would be nice to get a general sense of what to expect. I've encountered a lot of conflicting information. Thanks in advance for any advice!

 

[LdiJ]

What is the name of your state (only U.S. law)? VA

Hello,

My grandmother established a revocable living trust for estate planning purposes in 2006. She passed away in July of this year. I am her sole beneficiary and successor trustee (and personal representative as named in her pour-over will, should it be pertinent).

According to public records, the homeowner is currently identified as [GRANDMOTHER'S NAME], TRUSTEE. This has been the case since 2006, shortly after the creation of her trust. What I'm wondering is:

In my capacity as successor trustee, would I encounter substantial obstacles (i.e. anything above producing documentation I already have such as the trust documents, death certificate, and substantiating my identity/authority) selling the home as-is? Might it be necessary to re-title the home at this time?

If I am able to sell the home as it is currently titled: is that advisable from a tax perspective? I of course want to reduce any capital gains tax as much as possible. I do not intend to reside in or rent the home. I understand there is a "step up in basis" rule that can be advantageous, but I'm not sure if it applies due to recent legislative changes and the nature of this transaction. Am I able to use the fair market value of the home at the time of my grandmother's death as my basis? Or is that off the table unless the home is passing directly to me (instead of going through the trust)? Again, wondering if re-titling might be advisable (and if it's really as simple as that).

I know I will need to consult with a real estate attorney/tax professional as to the specifics, but it would be nice to get a general sense of what to expect. I've encountered a lot of conflicting information. Thanks in advance for any advice!

Yes, you would get a stepped up basis to fair market value as of the date of your grandmother's death. I do not believe that you need to retitle the house in order to sell it, but I would verify that with a real estate attorney.

 

[tranquility]

According to public records, the homeowner is currently identified as [GRANDMOTHER'S NAME], TRUSTEE.

If that is all that is shown on the deed, you may have a problem. Trustee of what trust? The generally accepted minimum way to title would be Grandma, trustee of Grandma's revocable living trust dtd 8/8/8 or something like that. Is the trust named on the deed? If not, you may need to go to court to amend the title before you can sell it.

If I am able to sell the home as it is currently titled: is that advisable from a tax perspective? I of course want to reduce any capital gains tax as much as possible. I do not intend to reside in or rent the home. I understand there is a "step up in basis" rule that can be advantageous, but I'm not sure if it applies due to recent legislative changes and the nature of this transaction. Am I able to use the fair market value of the home at the time of my grandmother's death as my basis? Or is that off the table unless the home is passing directly to me (instead of going through the trust)? Again, wondering if re-titling might be advisable (and if it's really as simple as that).

I agree with LdiJ that you get the stepped up basis. (However, if the property was jointly owned in the past, there could be a bit of an issue depending on how things were done. Grandma may only have had a life estate for 1/2 of the property with the step up for the OP when grandpa died.)

 

[LdiJ]

If that is all that is shown on the deed, you may have a problem. Trustee of what trust? The generally accepted minimum way to title would be Grandma, trustee of Grandma's revocable living trust dtd 8/8/8 or something like that. Is the trust named on the deed? If not, you may need to go to court to amend the title before you can sell it.

I agree with LdiJ that you get the stepped up basis. (However, if the property was jointly owned in the past, there could be a bit of an issue depending on how things were done. Grandma may only have had a life estate for 1/2 of the property with the step up for the OP when grandpa died.)

Tranq, there is no mention of "grandpa" on this thread. Are you getting it mixed up with another one?

 

[tranquility]

Tranq, there is no mention of "grandpa" on this thread. Are you getting it mixed up with another one?

No, I'm just supposing that if there is a grandchild, there was a grandpa at one point in the past. I did say "if" the property was jointly held sometime in the past.

 

[OHRoadwarrior]

It does not appear to be properly titled to a trust. This may create an issue with inheritance. Get the to an attorney PDQ.

 

[cyke68]

Many thanks to everyone who has weighed in. The way the home is titled raised an eyebrow for me as well, but I should clarify -- I'm just going by the county real estate assessment available online. I have yet to inspect any official documents as registered with the circuit court. Honestly, I'm wondering if the public data on the county website is simply truncated or doesn't show the full picture. I have a copy of a deed reflecting at least the intent to transfer the home to the trust from 2006 (well, I think... it identifies my grandmother as the grantor and "GRANDMOTHER, TRUSTEE OF THE GRANDMOTHER LIVING TRUST" as grantee). Even if it is in fact titled improperly at the present time, hopefully I can fall back on this transaction as evidence of what SHOULD have been done.

No, I'm just supposing that if there is a grandchild, there was a grandpa at one point in the past. I did say "if" the property was jointly held sometime in the past.

Your intuition was spot-on! I see that the home was jointly owned from the date of purchase until my grandfather's death. (Actually, my grandmother was not listed as sole owner until a few years after my grandfather's death. Not sure why, but it is what it is.) I don't know the provisions for that transfer, but you've definitely given me something else to think about.

 

[LdiJ]

Many thanks to everyone who has weighed in. The way the home is titled raised an eyebrow for me as well, but I should clarify -- I'm just going by the county real estate assessment available online. I have yet to inspect any official documents as registered with the circuit court. Honestly, I'm wondering if the public data on the county website is simply truncated or doesn't show the full picture. I have a copy of a deed reflecting at least the intent to transfer the home to the trust from 2006 (well, I think... it identifies my grandmother as the grantor and "GRANDMOTHER, TRUSTEE OF THE GRANDMOTHER LIVING TRUST" as grantee). Even if it is in fact titled improperly at the present time, hopefully I can fall back on this transaction as evidence of what SHOULD have been done.



Your intuition was spot-on! I see that the home was jointly owned from the date of purchase until my grandfather's death. (Actually, my grandmother was not listed as sole owner until a few years after my grandfather's death. Not sure why, but it is what it is.) I don't know the provisions for that transfer, but you've definitely given me something else to think about.

If your grandmother was listed a sole owner after your grandfather's death, then you need not be concerned with anything regarding your grandfather's will in relationship to the house. The house simply passed to her and then she put it in the trust. You do however need to clarify what the deed says.