Does Real Estate Get a Step Up in Basis When Put Inside A Trust?

Whether you own primary property or a vacation property in Virginia Beach, you need to plan for its future. The transfer of property can happen in a variety of ways and you should discuss your options with an estate planner.

Many estate planning tools can help you to transfer assets smoothly and with more control than an outright gift. One of these includes trusts. If you end up putting a piece of property, such as a condo or vacation home into a trust, you may be curious about whether or not this will get a stepped-up basis if it is sold after you pass away.

For most irrevocable trusts, and for all revocable trusts, the step up and basis likely applies. Trusts can be very helpful for managing out of state property and to avoid two separate probate processes that may occur after the death of the owners – the one in which the out of state property is located and the one in which the owners lived. Irrevocable trusts are typically used for asset protection, but you may need only a revocable trust. A step up in basis has to do with the calculation of the gains on the sale of the property for tax purposes.

Your capital gain is the difference between the net proceeds on the sale of the property and the overall basis. The initial basis for a piece of property is the purchase price of that property and can include the cost of any improvements that have been added.

A step up in basis is another adjustment that occurs when the original owner passes away. That basis is then adjusted to the date of death fair market value on the property. The new basis is almost always higher than the initial one. Make sure that you discuss the possibility for a step up in basis with real estate with your estate planning professional in Virginia Beach.



Three Common Questions About Trusts in Virginia

Establishment of a trust as part of your estate plan is a common goal for an increasing number of people. There are many different advantages that can be levied using a trust, but it is important to work with a qualified Virginia Beach, Virginia estate planning attorney.

What Are the Biggest Reasons For Using A Revocable Trust?

It is certainly true that there are more asset protection planning benefits associated with using an irrevocable trust, which means that you’re unable to change the terms of the trust or eliminate the trust itself in the future.

A revocable trust, however, does have some advantages, including that it can be revoked or amended. If you have real property in a jurisdiction outside the Commonwealth of Virginia, want to manage assets in trust after death, or want to avoid probate, these may be strong considerations for using a trust.

How Do I Incorporate Different Percentages to My Children Through A Trust?

Many parents frequently have concerns over this question because there are no requirements that a trust creator must leave equal assets to their children or any assets at all. Working with an experienced Virginia Beach, Virginia estate planning lawyer can help you to include the right language in your trust to address specific percentages or assets that you want to leave behind.

What If I Don’t Want to Leave Any Assets to A Child?

There are many different circumstances that might lead you to want to exclude someone from your estate plan. There are no strict rules about any child getting any of your assets upon your death. If you wish to preclude a child from receiving any assets, incorporating this language in a careful and strategic way with the help of her of a Virginia Beach lawyer is crucial for getting this documented.



What to Think About Before Creating a Trust in Virginia

Whether you are creating a trust for tax or non-tax purposes, it is extremely important to work with a qualified estate planning attorney. An appropriately drafted agreement can fulfill your intentions and ensure that you accomplish the goals you have structured. Your trust should include a variety of different important information including:

  • The names of institutions or individuals who have fiduciary duties, such as the current and successor trustee.
  • The identity of all beneficiaries.
  • The description of any initial capital placed inside the trust and authorization for additional contributions.
  • The conditions through which beneficiaries are entitled to receive income distributions from the trust, such as at a fixed rate, on a fixed schedule or through some other plan.
  • Specifying the term or time limit of the trust.
  • Provides for the payment or waiving of fees associated with the trustee’s role.
  • Provides for the security, bond or waiving of such security or bond for the trustee.

If you’re not sure who to name as a trustee, talk to a lawyer. You can appoint individuals or sometimes organizations to handle this responsibility, but you should always think it through carefully. This person or company will play an important role in administering your trust, so you should have confidence in their abilities.

Working directly with an estate planning attorney is one of the only ways to feel confident about the use of a trust for estate planning purposes. Set aside time to meet with a dedicated and experienced estate planning lawyer about your next steps. Our Virginia Beach estate planning lawyer can help you.


What Are the Most Common Types of Trusts for Estate Planning?

The support of an experienced lawyer can assist you with drafting a comprehensive estate plan. Your estate plan should align with your individual goals and strategies. Working directly with an experienced attorney can ease your concerns and stress over this process and make it simple to break it down into meaningful actionable steps.

There are several different kinds of trusts. The most important distinction is between revocable and irrevocable trusts. Revocable living trusts allow you to transfer assets outside of the probate process, and these trusts can be terminated or changed. These, therefore, provide less asset protection and have no tax advantages. Irrevocable living trusts also allow you to pass assets outside of the probate process, but do provide enhanced asset protection because they cannot be terminated or altered. This also means that assets properly placed inside an irrevocable trust by being retitled into them are beyond the reach of creditors and are not calculated as part of the total of your taxable estate.

This is one leading reason why many people turn to irrevocable trusts. Trusts give you more control over your assets after you pass away than wills. There are also many different kinds of specialized trusts available to you, such as a special needs trust for supporting a loved one with a disability, or a spendthrift trust, which can provide a greater level of control over how assets pass to those who may not be financially responsible to receive a lump sum.

Contact an experienced estate planning attorney in Virginia Beach to decide which kind of trust is the most appropriate for your needs.



What Important Estate Planning Documents Should be Stored Together?

Any document that might be needed to explain legally binding directions regarding your decisions or your wishes should be stored safely so that it can be quickly and easily accessed if something happens to you. Most people already have a filing folder to keep things like birth certificates and Social Security cards but there are other documents that you might want to have easily accessible in a fireproof safe so that they can be protected and easily found.

These include:

  • Insurance documents
  • Death certificates for loved ones
  • A power of attorney naming someone else as your power of attorney agent
  • A will, including the instructions for distributing your assets
  • Organ donation forms
  • A list of all of your assets
  • Trust paperwork
  • Legal documents like divorce or marriage papers
  • Deeds to houses, cars or other property
  • Contracts, particularly if they may be helpful in settling the estate
  • Financial documents like tax records

Physical document storage involves hard copy records and it can usually be stored at your place of business, at a rented storage unit, safety deposit boxes or with your attorney. For digital documents storage, this is an online copy of your documents so this would include documents that don’t have to be signed or as scanned copies of an original hard copy document.

There are many different options available to you to back up this information safely. Schedule a consultation with a trusted estate planning lawyer to learn more.



Can a Charitable Remainder Trust Be Used to Generate Income in Retirement?

What if you were able to accomplish multiple goals in creating a trust at once, such as avoiding capital gains taxes, selling a highly appreciated asset and creating a steady stream of retirement income for your loved ones? These are just a few of the most common pros of choosing a charitable remainder trust.

A charitable remainder trust is an irrevocable tax exempt trust that serves for the purpose of reducing your taxable income. These are becoming much more popular because they can reduce your tax liability overall. This is known as a split interest giving vehicle, meaning that the assets inside the trust are split between two different beneficiaries.

The initial beneficiary, which is usually the creator (you), a person you name and a charitable organization. There are a few different kinds of charitable remainder trusts but the vast majority of them function in the same way. The grantor who creates the trust contributes assets into it. This can be anything from cash to property to shares of stock or even artwork.

You’ll usually want to contribute something that is capable of appreciating in value and the terms of the trust from that point on are those that you set. Speaking with a trusted Virginia Beach estate planning lawyer can help you to determine whether or not a charitable remainder trust makes sense for your individual situation.


How Should I Fund an Investment or Bank Account in My Name Into a Trust?

When you are moving assets into a revocable living trust, it’s important to remember that the guidance of an estate planning attorney can be instrumental in making this process easier.

Funding brokerage investment or bank accounts into your revocable living trust could be complicated or easy depending on the specific rules of the institutions involved, so you’ll want to investigate that first.

Some financial institutions, for example, will make it as simple as changing the name on the account from your individual name to that of you listed as the trustee. Others might require that the original account be closed out and a new one be opened in the name of the trust. Regardless of the specific rules for your institution and what it demands for you to jump through, it is critical that you fund investments and bank accounts into the trust appropriately to avoid probate and to plan for other issues.

In addition to appointing yourself as the primary trustee of this estate planning strategy, you will want to name a successor trustee. This is the person that you name to step in and to take over management of your trust if you were to become mentally incapacitated.

The steps for funding an account into your revocable living trust include:

  • Write a letter of instruction.
  • Hand deliver your letter of instruction to a financial advisor or a bank.
  • Complete and return all required documents.
  • Confirm the formal transfer of the account.

For more support with these complex estate planning issues, schedule a consultation with an attorney in Virginia Beach.  


What Kinds of Property Should Be Placed Inside a Living Trust?

Want to use a living trust in Virginia? Or need more information about how a living trust differs from an irrevocable trust? In these cases, educating yourself is a great first step and one that you can follow with a Virginia Beach estate planning lawyer meeting.

Your most valuable property should be included inside your living trust to get the greatest benefit. One of the biggest reasons that most people create a revocable living trust with the help of an estate planning lawyer is to avoid the fees, court involvement and long process of probate. The more an item is worth, the more it could potentially cost to push it through probate.

Some of the most common pieces of property to consider including in your revocable living trust are:

  • Precious metals
  • Security accounts held by brokerages and stocks and bonds
  • Real estate
  • Copyrights and patents
  • Small business interests
  • Valuable works of art
  • Valuable collections

You are eligible to add property to your living trust at any time and since you will likely appoint yourself in the role of trustee in order to manage it, you can also give away or sell property in the trust or remove it and then put it back in your name as an individual. Although a living trust is a popular estate planning tool, it’s certainly not the only way to decrease the possible expense or frustration of probate.


Study Shows Americans Look at Trusts, Wills and Life Insurance In 2020

There are always good reasons to update an estate plan, such as big changes in laws impacting estate and gift taxes or changes in your personal life that warrant new beneficiaries. But world events or family events might also prompt you to rethink your strategies.

As the coronavirus pandemic has made the topic of death unavoidable, more people than ever stepped back to look at their existing estate plans or to craft strategies to close those gaps.

According to the MIB Group, the number of life insurance applications for people younger than age 44 increased by over 7% in 2020 despite the fact that applications for life insurance had been down in the previous years. The creation of key estate planning documents, such as a will were also up due to covid-19. One study recently completed by found that over 30% of people between the ages of 18 and 34 created wills directly as a result of the pandemic and its unexpected impacts.

Preparing for death can be difficult and an uncomfortable topic to discuss with your loved ones but it can also be especially important to have these conversations well in advance of a crisis.

If you need support crafting your estate planning documents or discussing whether or not your existing strategies help to accomplish your individual goals, it’s a good idea to have an existing relationship with an estate planning law firm in Virginia Beach that can help serve as an important resource for you during these times.

Avoid These Estate Planning Mistakes Prior To The Biggest Wealth Transfer in History

One of the biggest wealth transfers that the United States has ever seen will take place in the coming 25 years. This is because it is anticipated that up to $68 trillion of wealth will be passed from current to future generations. This presents you a unique planning opportunity, but this requires those responsible for the funds and assets now to be forward thinking and proactive planning.

Taking a couple of planning steps now, being mindful of the possibility of disabilities, and other issues can enable you to create an estate plan that protect your loved ones needs and saves them thousands in taxes and legal fees while decreasing the possibility of delayed estate issues. One of the most common and easily avoided estate planning mistakes is failing to properly designate beneficiaries. This can be overlooked when you are first setting up your retirement plan or switching to a new investment company.

Make sure that every retirement plan, life insurance policy and brokerage plan has accurate and updated beneficiaries associated with it. You can easily set up bank deposits like savings accounts and CDs and fail to neglect a beneficiary. It’s easy enough to add a transfer on death designation which allows this account to simply bypass probate and go directly to your beneficiaries.

Be mindful of the potential pitfalls of naming a minor as a beneficiary. You can instead list a guardian for the minor child inside your will, meaning that person is also appointed to manage any investments or property that the minor inherits until they achieve 18 of 21.

If you have established a trust, make sure that you follow through with funding it and have a consultation with an experienced estate planning attorney about your tax situation now and your anticipated tax situation in the future.