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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7152
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Im a fiduciary on my moms trust. I want to give my sister my

Customer Question

Im a fiduciary on my moms trust. I want to give my sister my mom's house. And take equal money out for myself. What are the tax liabilities i live in California. My mom is still alive. But has dementia. I have power of attorney on asset and heath care
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

From a tax standpoint, unless the home is worth more than a couple of million dollars, the only requirement would be to file a Gift Tax return on form 709 for the year you make the transfers. If you make the transfers (gifts) in 2016, unless the total of the two gifts are in excess of $5,450,000. over the annual gift tax exclusion amounts of $14,000. for each of you (total $28,000), there would be no gift tax due. There are a couple of other matters to consider.

In the case of the home, you will need to get an independent appraisal to support the amount of the gift and to use as the basis for your monetary distribution.

Also, you should note that your sister's tax basis in the home will be the same as your mother's tax basis; even though the gift tax return will use the home's fair market value, your sister will not be able to use that value as her tax basis. That is the disadvantage of making lifetime gifts of appreciated property. If the home were inherited from your mother or from your mother's revocable trust after your mother dies, then the beneficiary receives what is referred to as a "step-up" in tax basis equal to the fair market value of the appreciated property at the date of death. This can result in a substantial income tax advantage when the home is sold. That same tax treatment would apply to appreciated securities (stock) if that was transferred during your mother's lifetime, rather than at her death.

Another issue that you may want to confirm is that if the home is not in her revocable living trust, the you will want to make sure that your Power of Attorney is a "Durable Power of Attorney" which would allow you to administer her property for your mother's benefit in the case of her inability to act on her own behalf, for example because of her dementia. Further, since you are considering making gifts to your sister & yourself, either using the Power of Attorney in the case of property not in the Trust, or in the case of property in the trust, you should confirm that both the Power of Attorney as well as the provisions of your mother's trust, specifically permit you to make gifts on your mother's behalf. If not, you will want to consult with an attorney to review the documents and provide you with a legal opinion that what you are contemplating is permissible under the law in California. That can only be determined by a review of the actual documents involved.

Normally, the Power of Attorney will not apply to the Trust; those Powers will reside with the Trustee or Co-Trustee and if your mother is her own Trustee while she is alive, you will want to seek counsel as to when it is appropriate to make the determination that she can no longer act on her own behalf and confirm who & under what specific conditions the Successor Trustee has the authority to act.

I'll be happy to respond to any follow-up questions that you may have.

Steve G.

Expert:  Stephen G. replied 1 year ago.

Just checking in.............

I see that you have had a chance to view my response to your question. Do you have any follow-up questions? I'd be happy to further assist you if you like.

If not, please remember to rate my response as that is the only way I will receive my share of the payment that you have already made.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 1 year ago.

Joseph..........Is there something else I can assist you with? Are you having a problem with the rating system? Sometimes there seems to be an issue with customers being able to provide a rating; if that is happening to you, please just leave your rating in words; hopefully excellent, very good, etc. If you haven't been fully satisfied, please let me know in order that I may be able to further assist you. As I mentioned, without a rating, I will not receive anything for the time & effort expended on your behalf. Thanks very much,

Steve G.

Expert:  Stephen G. replied 1 year ago.

Joseph..........In re-reading your initial question, just so you are clear; there are no income tax implications (other than what I mentioned about your sister's tax basis in the home or your tax basis in any appreciated property that you may receive from the trust [ie. stocks, etc.]) related to the transfers you are considering from your mother and/or your mother's trust to your sister or yourself. Also, there should be no gift tax implications as noted above either. I hope that satisfies your inquiry?

Steve G.

Expert:  Stephen G. replied 1 year ago.

Just checking in...................I see that you have viewed my response. Please let me know if I can answer any follow-up questions you may have. If none, then please remember to rate my response as that is the only way I will receive my share of the payment you have already made to the site.

Perhaps there is something else that I can assist you with?

Thanks very much,

Steve G.

Expert:  Stephen G. replied 1 year ago.

Did you experience problems with re-locating your question after I responded to it? AND/OR,

Did you by any chance experience problems with the rating system?

I ask as around the time of your question the site was having some issues in this regard and some of the ratings weren't credit to us. If that was an issue with you, perhaps you could just indicate your rating in words, hopefully good, very good or excellent. If you would take a moment to do that, customer service with credit me with responding to you and close out the question favorably.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 12 months ago.

Just checking in.....................

I'd like to close out this question before the end of the month, if possible.

I would appreciate it if you would take a moment to let me know if I can assist you further and if you would provide a rating for my responses as indicated above.

Thanks again,

Steve G.