Irrevocable trust

Forum|Forum|2 years ago
August 23, 2023
2 replies
7 views

Does an irrevocable trust receive a step up in basis when real estate is placed in the trust?

TurboTax Business Windows

NCperson

Level 15

what is occuring first?

the individual owner passes

the real estate is placed into the irrevocable trust?

https://kahnlitwin.com/blogs/tax-blog/irs-clarifies-step-up-in-basis-rules-for-grantor-trusts

demitx475Author

Level 3

Placed in the trust came first.

Mike9241

Level 15

property contributed to the trust by a grantor does not get stepped up. but are you sure it's really an irrevocable trust. many have "irrevocable" in their title but under the tax laws, because the grantor still retains certain powers, it's a grantor trust. still no step-up. however, in this case should the grantor die, the trust would become irrevocable and get a step up in the assets.

Mike9241

Anonymous_

Level 15

I agree; placing property in a trust by a living person (a grantor who is still alive) does not impact the basis, one way or the other (versus not placing the property in a trust) unless assets are actually sold to the trust (typically this would involve an IDGT as an estate planning vehicle).

What this does impact is whether the grantor still technically owns the property (i.e., the trust is a grantor trust (or partial grantor trust)) or whether the grantor has totally relinquished dominion and control over trust assets to the extent that the trust is now a separate entity (i.e., a nongrantor trust). The terms of the trust need to be reviewed in order to make that determination.