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Level 1

Are we taxed on the sale of house sold in Family Trust?

Mother's house was in a Family Trust, in very poor condition.  She passed away in March. House has been sold for $100,000 below assessed tax value. Are the proceeds from the sale taxable? Do we the 4 children who are left have to pay inheritance taxes on our shares in Maryland?
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Accepted Solutions
Level 20

Are we taxed on the sale of house sold in Family Trust?

You need a CPA or lawyer who is knowledgeable in wills, estates and trusts. If still living, the one who prepared the trust would probably be best. But the bottom line is, because of all the possible scenarios at BOTH the federal and state level when it comes to taxes, you need legal representation that you can personally hold legally and financially liable for the information and advice they give you. You do not have that protection in this public user-to-user forum. Please seek professional help with a pro that you can look in the eyeballs and make it clear that you are holding them financially and legally responsible.

8 Replies
Level 12

Are we taxed on the sale of house sold in Family Trust?

Nobody can tell you until they read the trust.  There are many types of trusts, and each can be different, and each individual trust may specify how to handle things.

I recommend going to a tax professional and/or an Estate lawyer.
Level 1

Are we taxed on the sale of house sold in Family Trust?

It is my understanding that inherited property has an acquisition value at the time of passing of the last owner, which would be your mother as the prime trustee of the family trust. You should have had the house appraised soon after she passed. Any taxes would be due on the appreciation of the property since she passed, which appears to be zero or negative. You and your siblings do not owe taxes on the total value of the house. I do not know about Maryland tax code.
Level 12

Are we taxed on the sale of house sold in Family Trust?

@dickcaro   The house was in a Trust, and it depends on the trust.  For example, an irrevocable trust would NOT get the 'step up' value on death.
Level 1

Are we taxed on the sale of house sold in Family Trust?

I am going to a CPA  in the county where she lived. The trust has wording in it that says it was created to avoid taxes due to her heirs or something like that. We did have 2 real estate agents come in and in their estimation due to the amount of repairs needed they said the house was worth between $90k and 110k at the most. We sold it to a company for 140k. The county tax  assessment has it assessed at 270k.
Level 12

Are we taxed on the sale of house sold in Family Trust?

If you sold it for $140,000 a few months after she died, it would be worth about $140,000, not $90,000-$100,000.

Most likely dickcaro is correct and it will get a 'step up' in value, which means most likely there will be little or no tax due.

However, that wording in the trust MIGHT be a bad thing.  It MIGHT mean that the trust will pay any taxes, which would be quite a bit higher than if the individuals pay that tax.  But again, until the trust is thoroughly read, it is impossible to know what it going to happen.
Level 1

Are we taxed on the sale of house sold in Family Trust?

I plan on going to a CPA to have all of the tax paperwork done. The lawyer was going to send us to one that his firm deals with.
Level 20

Are we taxed on the sale of house sold in Family Trust?

The cost will be well worth it, as it will be significantly cheaper than the potential fines and penalties that would be imposed for reporting things incorrectly.
Level 20

Are we taxed on the sale of house sold in Family Trust?

You need a CPA or lawyer who is knowledgeable in wills, estates and trusts. If still living, the one who prepared the trust would probably be best. But the bottom line is, because of all the possible scenarios at BOTH the federal and state level when it comes to taxes, you need legal representation that you can personally hold legally and financially liable for the information and advice they give you. You do not have that protection in this public user-to-user forum. Please seek professional help with a pro that you can look in the eyeballs and make it clear that you are holding them financially and legally responsible.