A Living Trust, also called an “inter vivos trust” or a “revocable living trust,” appoints someone (the “trustee”) to hold title to and manage your assets during your lifetime and after your death. You can be the trustee of your own trust and remain in full control of the trust property during your lifetime. You can change the terms of the trust, cancel the trust entirely, and add or remove assets at any time, as long as your are not incompetent. If you die, or you become incapacitated, then the successor trustee nominated in your trust document will take over. At that point, the terms of the trust usually cannot be changed.
A trust is desirable because, if something happens to you, all assets in your trust can be managed, and eventually pass to your designated beneficiaries, without any probate court involvement. A trust avoids probate court, allows greater flexibility for planning, allows for delayed transfer of assets, and can be structured to provide greater protection to your loved ones than merely having a Will.
Helene P.Dreyer Koch is an estate planning attorney in Indian Wells, California, focusing on Wills, Trusts and Probate. She is also a skilled legal writer and dynamic public speaker. (760) 360-2400.
I am the maker and the trustee, along with my wife, of a living trust. We have long term capital gains in our stock portfolio of over a million dollars. I know that when I die as an individual my wife can step up the cost basis to the date of death price Is that true also if the stock is held in our living revocable trust?
Great question! The simple answer is “yes” – holding it in your revocable living trust will not alter the tax result for which you might otherwise qualify. Generally speaking, a surviving spouse can get an adjusted tax basis (it can go up or it can down — be careful there) for all of the property owned by the deceased spouse. If you live in a community property state, the surviving spouse can get the adjusted basis over all of the community property, not just the decedent’s share of it. Holding the property in the decedent’s revocable living trust is fine. NOTE: This is information of a general nature only and may not be relied upon as legal advice. The facts, circumstances, and laws applicable to your own matter may differ substantially from the general information and you must consult your own legal advisor for specific information about your own situation.
Generally the answer is “yes,” but you should consult with your tax advisor for information specific to your situation. Also, keep in mind that if your stock is in an IRA, it is not capital gains that will apply, but income tax on the withdrawals. The cost basis adjustment does not affect IRA assets.