Accepted Answer

Hello XXXXXXXX,

No, you are not subject to any taxes as a result of this trust being established. Your mother is simply creating a trust to hold the assets which will then pass to you at the time she passes away.

When your mother does pass away you will then inherit these assets. Her entire estate at that time would be subject to estate taxes, only if the entire value of her estate exceeds a certain limit. The current exclusion for estates which are subject to estate tax is $3.5 million. So if your mother were to pass away this year, if her estate were valued at $3.5 million or less, then no estate taxes would be due. That being the case, the assets in the trust pass to you and your brother without any taxes being due.

If her estate were to exceed the estate limit, then the estate taxes would be paid fromt he assets in the estate, and the remainder of the assets pass to you and your brother.

If part of her trust includes property, such as the land parcel, you will receive a stepped up basis on that property when you inherit it. That means that your new basis in that land will be whatever the fair market value is on the day you inherit it. If you later sell that property for more than your new stepped up basis, then you would pay capital gains tax on the selling price less your basis. However, if you sell inherited property soon after you inherit it, then generally your selling price will be the same or close to your new basis, so you would have no taxable gain from the sale.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXX

Expert:	Merlo
Pos. Feedback:	99.8 %
Accepts:
Answered:	10/21/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad