Real Estate Capital Gain

[cewilliams]

My mother had a living trust set up for her home.  She passed away in March of 2018.  My sister and I were the beneficiaries of the trust.  We sold the house in June.  What is the basis for the original value of the home?

[Carl]

You need to talk with the administrator of the trust on this. It depends on what type of trust. There are many different types of trusts, and each can be set up in just as many ways. For example, if it was a revocable living trust, then upon her passing it most likely became an irrevocable trust.  Also, laws differ state to state on trusts. So if the trust administrator is/was you and you don't understand how this stuff works, then I would highly recommend you seek the services of an attorney well versed in this, in your area. If you'll check the yellow pages I'm confident you'll find quite a number of those that specialize in wills, estates, trusts and probate. That's what you need.  The type of trust and how it's set up can and will affect the cost basis of any real estate held by the trust at the time of her passing.

[TomYoung]

Typically the term "Living Trust" is referring to a  revocable trust because the trustee of the trust, (usually the grantor of the trust, the person who set it up and contributed the assets), is considered the owner of those assets.  So if mom was the trustee until she passed the basis of the house to the beneficiaries would be stepped up to FMV at DoD.  Any improvements made to the house from DoD to the sale would be added to that stepped up basis.  The DoD value of the house would also be included in mom's estate for estate tax purposes.

However, Living Trusts can be created that are irrevocable.  This is the case if an independent trustee was managing the trust while mom was alive.  In this instance mom's original basis in the house would carry over to the beneficiaries.

Your wording - "mother had a living trust set up for her..." - suggests an attorney drew up the trust documents and that's the logical place to ask "was this a revocable or irrevocable living trust?"