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Member
Group: Forum Members
Last Login: 2/19/2007 4:39:12 PM
Posts: 1,
Visits: 9
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| Hi, Does anyone have experience with using a percentage of the personal residence to fund the Marital Trust? Can I use Sect. 121 to offset the gain realized on funding? Are there issues I need to be aware of, such as property tax basis and revaluation? Thanks!
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Power Member
Group: Forum Members
Last Login: 3/12/2011 12:58:57 PM
Posts: 147,
Visits: 823
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| I've never had gain on funding when using the residence to fund the marital trust so I can't answer the 121 question. Is the spouse the one with gain on funding and not the trust? If the trust held the property before the death, there is no prop 13 revaluation when you split it between the survivor and a trust. That's assuming the survivor is the trustee and beneficiary both before and after the split.
Mary Kay Foss
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"Marital Trusts" have multiple meanings these days. I've seen credit or bypass trusts referred to as marital trusts in trust documents, and I've seen QTIP trusts called "marital" or "marital deduction" trusts. I've also seen survivor's trusts titled as "marital" trusts.
You may only benefit from use of the 121 deduction, if all or part of the personal residence is in the Survivor's Trust or the equivalent of the survivor's trust. This is a trust that is still revocable during the survivor's life and is treated like a grantor trust. If only part of the personal residence is allocated to the survivor's trust, then the $250,000 amount (assuming sold in a year after first spouse died) is only used against that portion in the survivor's trust. You do not have to pro-rate the deduction based upon the ownership percentage of the trust. The bypass and QTIP trusts are not allowed any part of the deduction.
Sometimes the personal residence will make up over 50% of the value of the estate. I always try to fund all or most of the personal residence to the survivor's trust, due to the 121 deduction. I realize that if a property is sold shortly after death, that you have a step up in basis and may not have much gain. In California the last couple of years, as you may know, you may have had a 20% to 50% increase in value since the first death.
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