Properties in a trust

[mmilhous]

Before my parents died 22 years ago, they created living trusts and placed their properties in them for my siblings and me, who were named co-trustees. Most of their properties were sold a year or two after their deaths, but there are still two properties in the trust, and they are on the market. When they sell, how will they be taxed? As capital gains at 25%? Or are they still considered part of my parents' estates? They lived in Tennessee.

[tagteam · Accepted solution]

The primary issue in this format is that no one here can read or review the terms of the trust.

Regardless, if the properties are still held in the trust, then they are not part of the estate. In any event, if the properties are sold by the trust, then it is likely that a Form 1041 will be required to be filed (unless this is somehow a grantor trust, which would be highly unusual).

See https://www.irs.gov/instructions/i1041#en_US_2021_publink1000285943

You should absolutely consider contacting a local tax professional and/or local legal counsel for this matter.

See https://taxexperts.naea.org/listing/service/estates-gifts-trusts

See also https://taxexperts.naea.org/listing/service/estates-gifts-trusts

[tagteam · Accepted solution]

To answer your question about the capital gains tax rate, the maximum long-term rate is 20% (plus the 3.8% net investment income tax, if applicable).

There are other considerations if the property was ever rented or otherwise held for business use.