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Posted by Herb Smith on April 3, 2007, 7:23 pm
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> My father died last September and the family trust split
> into Trust A (mother's trust) and B (father's trust). =A0The
> net value of their estate at the time of his death was about
> $330,000. =A0Their house just sold and we are splittling the
> proceeds equally into each of the trusts (the title was 50%
> A and 50% B), we will be funding the remaining balance from
> Trust A into Trust B so Trust B will have $165,000 (50% of
> the net estate value at time of death). =A0We plan on
> investing the Trust A money into income producing assests
> which will grow in value over time.
Kind of an oxymoron here. You have to decide whether you
want current income or long term appreciation of the assets.
Perhaps investing in a more "balanced" set of funds is what
you are after.
> At the time of his death, the lifetime exemption per person
> was 1.5 million, so he was way under that. =A0My question is,
> when the estate eventually passes to the children after my
> mother dies, what will be the exemption from trust A? =A0Will
> it be only the initial $165K =A0or will it be up to the 1.5M
> that was the exemption at his time of death? =A0All of this of
> course assumes there will still be an estate when the estate
> passes to the heirs - there may not be.
Trust A, as you have described it, is the property of your
mother and the assets in that trust will be adjusted
(stepped up or down) to FMV upon her death. Combined with
her other estate assets, they will be subject to the
lifetime estate exclusion in force at that time. If death
occurs in 2010, the exemption is unlimited. Distribution of
these assets will be as directed by the trust and/or will
provisions.
Trust B, which is often called the "family trust", is NOT
part of her estate. She may have the right to income
produced by the trust during her lifetime, but the children
(usually) are the ultimate beneficiaries. Assets will be
valued at their purchase price or value when placed in the
trust, and will not receive any step up in cost basis upon
mother's death. There is no estate exemption - that was used
when the trust was created.
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