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Author: tele720 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121114  
Subject: Trust & Transfer of Assets ??? Date: 1/26/2009 1:30 PM
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Hello.

My parents recently set up an irrevocable trust and transferred some assets into the trust, including property. They are currently retired and do not have enough income to be required to file a federal tax return. The paperwork for the transfer was such that the jointly held property was transferred 1st to one of my parents and then into the trust.

I have 2 questions:

1) Are there any gift tax consequences associated with the transfer of the property into the trust? Is necessary to file a federal tax return in regards to any gift taxes?

2) I am a trustee, but the assets are currently held by the trust. Am I required to file any paperwork (tax or otherwise) related to the transfer and/or gift taxes.

Thanks in advance, -- Jake
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Author: REITster Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104013 of 121114
Subject: Re: Trust & Transfer of Assets ??? Date: 1/27/2009 3:37 PM
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1) Are there any gift tax consequences associated with the transfer of the property into the trust? Is necessary to file a federal tax return in regards to any gift taxes?

2) I am a trustee, but the assets are currently held by the trust. Am I required to file any paperwork (tax or otherwise) related to the transfer and/or gift taxes.


The answer can vary. If your parents are the income beneficiaries of the trust or if the title of their residence was put in the trust and they continue to live there, that would change the picture.

However if they completely have separated themselves from the property placed in the trust, I believe the gift would then be completed and the one who placed the assets in the trust would have to file a gift tax return. Unless used previously, each parent has a $1,000,000 lifetime gift tax exclusion. If the transfers are valued over $1,000,000, the other spouse can also file a gift tax return and they can both elect on their returns to treat the gift as one-half from each of them, and have a 2 million exclusion.

As trustee, you would have to file an annual trust income tax return (Form 1041) if the trust has any income. The trust annual exemption is $100 for a complex trust (doesn't distribute all its income) and $300 for a simple trust (distributes all its income). The trustee would furnish forms K-1 to anyone who received income from the trust so they can included the income on their personal returns.

There are all kinds of possibilities. If this a "grantor trust" for example, the rules may vary.

You really need to sit down with a competent tax advisor and let him or her read the trust document, review all steps taken by your parents, see the documents transferring the property to the trust, and a list of all transactions in the trust (all property received, all income received, all expenses paid, all distributions made.)

My answer is worth only as much as you paid me (which is zero). Visit a CPA or other tax advisor who is knowledgable about estate planning and trust tax law. This is too complex for a casual answer by somone who knows hardly anything about what happened.

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Author: tele720 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104047 of 121114
Subject: Re: Trust & Transfer of Assets ??? Date: 1/29/2009 12:38 PM
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REITster -

Thanks for the reply.

First the serious question, do you have any recommendations for finding a "competent tax advisor"?

If you can provide any further clarification, given my answers below it would be greatly appreciated. I do understand the importance of speaking with a "professional" but am trying to educate myself in order to provide backup to the professional opinion.

The answer can vary. If your parents are the income beneficiaries of the trust or if the title of their residence was put in the trust and they continue to live there, that would change the picture.

They continue to live in the home.

Unless used previously, each parent has a $1,000,000 lifetime gift tax exclusion.

Neither parent has used any of the $1M exclusion.

If this a "grantor trust" for example, the rules may vary.

I don't 100% know if it is a grantor trust or not. It was initiated by my parents and is irrevocable, however it could be an IDGT. I'll have to look into this some more.

Thanks. -- Tele

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104048 of 121114
Subject: Re: Trust & Transfer of Assets ??? Date: 1/29/2009 1:09 PM
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My parents recently set up an irrevocable trust and transferred some assets into the trust, including property. They are currently retired and do not have enough income to be required to file a federal tax return. The paperwork for the transfer was such that the jointly held property was transferred 1st to one of my parents and then into the trust.

I have 2 questions:

1) Are there any gift tax consequences associated with the transfer of the property into the trust? Is necessary to file a federal tax return in regards to any gift taxes?

2) I am a trustee, but the assets are currently held by the trust. Am I required to file any paperwork (tax or otherwise) related to the transfer and/or gift taxes.


I have one question. Surely they didn't do this without legal counsel. Why aren't you asking your questions there?

Phil

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