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Financial Planning / Tax Strategies


Subject:  Re: Trust Taxes Date:  10/22/2006  8:51 PM
Author:  Wradical Number:  89197 of 124795

Each heir's distribution will probably in shares of the equities,thus getting a stepped-up basis for each stock.
My question is will the trust have to pay capital gains tax on all stocks appreciation once the distribution to the heirs occurs?


There is really not enough information given.

Generally, a trust does not recognize a gain on distributions - although it could elect to, by electing to treat the assets as being sold to the beneficiaries.

And there may or may not be a step-up in basis at your MIL's death;
If the trust was the subject of a QTIP election at your FIL's death, to qualify the trust for the marital deduction, it would be includible in your MIL's estate, and subject to a basis step-up at her death.

You need to discuss this with the attorney who is handling MIL's estate, who I assume is familiar with the trust, as well as the will.

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