Who should I consult?

[DonB]

State: California

Several years ago my mother passed away, prior to her passing her home and other assets were placed in a trust. Of which I am the administrator. Recently the home was sold and the proceeds will soon be deposited into the trusts account. Once this is done the money will be split between my sister and myself. So my question is who best to speak to so we can best understand how we should proceed to mitigate our tax liabilities?

 

[Zigner]

State: California

Several years ago my mother passed away, prior to her passing her home and other assets were placed in a trust. Of which I am the administrator. Recently the hike was sold and the proceeds will soon be deposited into the trusts account. Once this is done the money will be split between my sister and myself. So my question is who best to speak to so we can best understand how we should proceed to mitigate our tax liabilities?

An accountant.

 

[adjusterjack]

Or DonB can just hang around here for a bit and wait for our tax pros to come by with some basic information.

 

[Zigner]

Or DonB can just hang around here for a bit and wait for our tax pros to come by with some basic information.

While true, the problem with that is it's general information and nobody here will have any skin in the game for information that turns out to be wrong for the OP.

 

[LdiJ]

State: California

Several years ago my mother passed away, prior to her passing her home and other assets were placed in a trust. Of which I am the administrator. Recently the hike was sold and the proceeds will soon be deposited into the trusts account. Once this is done the money will be split between my sister and myself. So my question is who best to speak to so we can best understand how we should proceed to mitigate our tax liabilities?

Did you mean house rather than hike? If so, then the trust received a stepped up basis to fair market value as of the date your mother passed. When selling an asset such as a house the taxable portion is the difference between the basis and the net selling price (after selling expenses). So, (as an example) if the house was worth 800,000 when she passed away, and it was sold for 1,000,000 with selling expenses of 70,000, then the taxable portion would be 1,000,000 - 70,000 - 800,000 = 130,000

If the trust pays the taxes the tax rate (percentage) is going to be fairly high. If the income is passed through to the heirs via a Schedule K1 the tax rate would be whatever your individual tax rates happened to be, which would generally be lower than the trust's rate, but a good tax professional can help you determine that. You need someone that is experienced in both trust tax returns as well as individual tax returns.

The trust will need to file a tax return whether the trust pays the tax or it's passed through to the heirs.

 

[LdiJ]

An accountant.

Many accountants deal only with the accounting side of things rather than dealing with the tax side of things.

 

[Taxing Matters]

State: California

Several years ago my mother passed away, prior to her passing her home and other assets were placed in a trust. Of which I am the administrator. Recently the hike was sold and the proceeds will soon be deposited into the trusts account. Once this is done the money will be split between my sister and myself. So my question is who best to speak to so we can best understand how we should proceed to mitigate our tax liabilities?

A tax attorney, a tax CPA, or an enrolled agent (EA). Neither a law degree or accounting degree gives a lawyer or accountant education needed to learn tax law, so they need to get a degree beyond their law or accounting degree. For the lawyer, it's a Master of Laws degree (LL.M), for the accountant it's a master's degree in taxation. As an alternative, an attorney or accountant who worked for the IRS in tax law matters will have tax law knowledge through that experience. If a lawyer or accountant doesn't have the degree and/or the experience skip that person and find one who does. The EA is a tax pro who has passed a competency test administered by the IRS. Quite a few EAs are former IRS employees. All three types of tax professionals are authorized by federal regulations to represent taxpayers before the IRS.

 

[Taxing Matters]

Did you mean house rather than hike? If so, then the trust received a stepped up basis to fair market value as of the date your mother passed.

That's very likely, as most trusts used for estate planning today are revocable living trusts. But I want the OP to be aware that if it is not a revocable living trust, i.e. an irrevocable living trust and does not have any tax provision in it that exposes the trust assets to the estate tax then there will be no basis step-up. It's important to check that out and not just assume that it was a revocable living trust.

 

[LdiJ]

That's very likely, as most trusts used for estate planning today are revocable living trusts. But I want the OP to be aware that if it is not a revocable living trust, i.e. an irrevocable living trust and does not have any tax provision in it that exposes the trust assets to the estate tax then there will be no basis step-up. It's important to check that out and not just assume that it was a revocable living trust.

Good point.

 

[DonB]

Thanks all for the feedback, as always this site/forum proves very useful.