Phyllis T <
wap...@cox.net> wrote:
> Hi, my husband and I have a "standard" A/B Trust. We are both the
> trustees. It is set to divide into 2 trusts when the first one of
> us dies, split evenly, with the surviving spouse as the trustee of
> both trusts. I hope I understand this and have communicated it
> correctly. There is nothing special about the trust, just a
> husband and wife.
Yes, that is the standard way these trusts are structured.
> In any case, our stock accounts are "titled" in the name of the
> trust, with us both as trustees named. What happens when the
> first of us dies? Do the stocks in the account all get an updated
> basis? We live in Nevada, which is a community property state.
Revocable trusts are transparent for tax purposes, meaning that they
are treated like they don't exist.
The normal rule is that property you inherit gets a stepped up basis
as of the date of the donor's death. However for community property,
both spouse's shares of community property get a stepped up basis
when the first spouse dies. This is the rule with or without a
trust.
So say your husband dies first, and his half of the community
property goes into the B trust, which then becomes irrevocable. It
should be set up so that you have the right to all the income from
that trust, and princple if you establish that you need it. But it
is not considered owned by you. So when you die, it is not included
in your taxable estate for estate tax purposes.
But that also means that the assets in the B trust don't get another
step up in basis when you die. If your combined estates are low
enough so that you don't have to worry about estate tax in any case
(at this point under about $5.5 million), you may want to consider
re-drafting your trust to eliminate the B trust, and preserve the
second stepped up basis in the half of the property belonging to the
first spouse to die.
--
Stu
http://DownToEarthLawyer.com