individual account to irrevocable trust

Submitted by Douglas Bauerband on Thu, 2021-09-02 20:59

Client lives in FL and retitling her accounts to a irrevocable trust due to probate in FL.

She has 300k in the account and started with 240k a few years ago.

The management company will not just retitle the account but we have to do a whole new appl. for the irr trust and have a in service transfer form signed to have the positions from the indiv acct transfer to the irr trust acct.

1. If we write a new appl for the irr trust and transfer the money to the Irr trust (within the same management company – moving assets over “like to like”), does she incur a 60k capital gains tax?

or…

2. since it is her irr trust (has TIN number) there is no capital gains tax since “like to like” transfer within the same management company?

Thank you
Douglas

Ps. Have a wonderful and safe holiday weekend.



Submitted by Bruce Steiner on Thu, 2021-09-02 23:19

Probating a Will in Florida is generally not particularly difficult, expensive or burdensome.
If it’s an irrevocable trust, is it a Medicaid trust?

Submitted by Douglas Bauerband on Fri, 2021-09-03 16:29

Its an irrevocable trust.1. If we write a new appl for the irr trust and transfer the money to the Irr trust (within the same management company – moving assets over “like to like”), does she incur a 60k capital gains tax?or…2. since it is her irr trust (has TIN number) there is no capital gains tax since “like to like” transfer within the same management company?Thank youDoug 

Submitted by Alan - IRA critic on Fri, 2021-09-03 17:39

There is no cap gains tax as a result of the transfer, but a gift tax might apply. See following explanation. Trust could be either a grantor trust under client’s SSN or a non grantor trust with it’s own tax ID.
“Irrevocable TrustsFor assets held in irrevocable trusts, the basis depends on whether the trust is deemed a grantor trust. An irrevocable trust is a grantor trust when the trust continues to use the grantor’s tax identification number. While the assets are removed from the estate for estate tax purposes, the grantor continues to be liable for the trust’s income taxes. The trust assets will carry over the grantor’s adjusted basis, rather than get a step-up at death.Assets held in an irrevocable trust that has its own tax identification number (i.e., nongrantor trust status) do not receive a new basis when the grantor dies.When the grantor transfers the assets to the trust as a gift, the grantor’s adjusted basis as of the date of the gift continues to be the basis of the trust assets. When assets are distributed to the beneficiaries, there is a carryover basis of the trust’s adjusted basis as of the date of the distribution.”

Submitted by NY(C) user on Sun, 2021-09-12 13:12

Consider an irrevocable trust with its own TIN. The trust document states (I paraphrase loosely) that all the income is to be paid to the beneficiary (the settlor) . The settlor/beneficiary retains certain rights to make sure that the trust is consider a grantor trust. Would that not work?

Submitted by Douglas Bauerband on Sat, 2021-10-30 20:24

She has this.  So just to recap:1. when changing from individual account to irrevoacable trust under its own TIN, there will be no capital gains tax, correct? 2. Every year we must distribute all income (capital gains, dividend, interest) to her to avoid the trust paying a higher tax, correct?Thank you very much.Douglas

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