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Irrevocable trust

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

8 Replies

Irrevocable trust

what is occuring first? 


the individual owner passes




the real estate is placed into the irrevocable trust? 



Irrevocable trust

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. 

Irrevocable trust

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.

Irrevocable trust

Placed in the trust came first.  

Irrevocable trust

My mother gave up all control of the assets that were placed in the trust.  It is "irrevocable".  

Irrevocable trust

@demitx475 - then no 'step up' - read the link I posted above, 


suggest reviewing with a lawyer to be sure it is irrevocable. 

Irrevocable trust

Thank you so much for your replies.  I love Turbo Tax community!

Irrevocable trust

One more thing, @demitx475:


Unless your mother actually sold assets to this irrevocable trust, then the transfer is likely to be considered as a gift to the beneficiaries. As a result, a gift tax return (Form 709) might need to be filed.


See https://www.irs.gov/instructions/i709#en_US_2022_publink16784xd0e314 ($17,000 per donee for the 2023 tax year).


If the value of the assets transferred are substantial, you should consult local tax counsel.

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