Posted on: 25th Mar, 2009 12:32 pm
My dad wants to transfer his home to myself and my son, and it is currently in a revocable trust in Oklahoma. We were going to use a deed with a life estate so that he could still live there, and we could enjoy a stepped-up basis on the property. I read somewhere that the gift tax exemption doesn't apply when transferring real property out of a trust. If this is correct, and the house is worth $75k, is there a tax liability involved?
Hi roncking,
What you read about the gift tax exemption is true. As far as I know, a transfer from a trust does not qualify for an annual gift tax exemption of $12,000. The transfer will also involve other taxes like stamp doc fees, recordation fees etc. If you want to avail of the gift tax exemption, your dad needs to quitclaim the property from the trust to himself (trustor) and then transfer it from him to you through a quitclaim deed. Thus, I think keeping the property in the trust looks like the best option in this case.
What you read about the gift tax exemption is true. As far as I know, a transfer from a trust does not qualify for an annual gift tax exemption of $12,000. The transfer will also involve other taxes like stamp doc fees, recordation fees etc. If you want to avail of the gift tax exemption, your dad needs to quitclaim the property from the trust to himself (trustor) and then transfer it from him to you through a quitclaim deed. Thus, I think keeping the property in the trust looks like the best option in this case.