How to handle a family trust

Q: Both my parents created revocable trusts during their lifetimes. I am trustee. My father died before my mother. I have learned that the cost basis for my mother's assets can be either her date of death or six months later. I'm unclear regarding the cost basis of assets in a family trust, the trust created at my father's death for use by my mother. The assets of both trusts now go to beneficiaries. What cost basis applies for the family trust?
- C.M., Philadelphia

A: You're right. After a death, the cost basis is the value as of the date of death, or the value as of six months following, if the executor has elected the alternate valuation date.

There are two types of trusts that may be involved, says Kathleen Day, a certified financial planner in Miami. The bypass - or credit shelter - trust would hold the amount that could be passed from your father to beneficiaries without incurring estate taxes.

Usually this type of trust is constructed to pay out income to your mother, and at her death, the principal goes to the ultimate heirs. The assets in this trust are not included in your mother's estate and are assigned the cost basis as of the date of your father's death (or six months later).

Ms. Day says that the second type of trust generally holds the remainder of the estate. It uses the unlimited marital deduction to avoid estate taxation at the first death and the assets are included in your mother's estate. Since the assets in this trust are part of her estate, they would receive a step-up in basis at her death.

You've read 3 of 3 free articles. Subscribe to continue.
QR Code to How to handle a family trust
Read this article in
https://www.csmonitor.com/2004/0329/p16s01-wmgn.html
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe
CSM logo

Why is Christian Science in our name?

Our name is about honesty. The Monitor is owned by The Christian Science Church, and we’ve always been transparent about that.

The Church publishes the Monitor because it sees good journalism as vital to progress in the world. Since 1908, we’ve aimed “to injure no man, but to bless all mankind,” as our founder, Mary Baker Eddy, put it.

Here, you’ll find award-winning journalism not driven by commercial influences – a news organization that takes seriously its mission to uplift the world by seeking solutions and finding reasons for credible hope.

Explore values journalism About us