Cost basis on stocks in trust distributed at beneficiary's death

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Cemsew
Posts: 1
Joined: Mon Jan 22, 2018 12:19 pm

Cost basis on stocks in trust distributed at beneficiary's death

Post by Cemsew »

Situation: my dad (grantor) created a trust and left the trust assets to two of his children (beneficiaries). Dad passed in 2014.

Wanted three "family" stocks to stay in family so he listed these 3 stocks to be kept in the trust, dividends paid to the two beneficiaries, and upon each of their deaths, stocks given to their children (issue). The rest of trust assets have been distributed.

No new trust was created by his death for these stocks.

What would the cost basis be to the issue of the beneficiaries when they receive the stock upon the beneficiary's death: cost basis date of grantor's death or date of beneficiary's death?

Want to make sure my children are aware of this.

Thank you.
jaxbmw
Posts: 20
Joined: Sat Aug 16, 2008 6:45 am

Re: Cost basis on stocks in trust distributed at beneficiary's death

Post by jaxbmw »

So if the stocks were already in the Trust at the time of his passing and no other Trusts were formed, I believe that the basis of the stocks would be the basis at the time of their transfer into the Trust. That basis would continue for beneficiaries as well as issue.

I am assuming that this was not a Revocable Trust but an Irrevocable Trust. The reason I mention this is that if this was a Revocable Trust then at his passing there would be a stepup in basis and the Trust would probably go Irrevocable. If on the other hand it was an Irrevocable Trust then the basis remains as it was when it was transferred in. This does not mean that the basis was established on the date it was transferred in. It means that whatever the basis was while owned by your father is what it is now.

John
bsteiner
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Re: Cost basis on stocks in trust distributed at beneficiary's death

Post by bsteiner »

Upon the gift, the basis for gain would be the same as the grantor's basis, increased by the pro rata portion of the gift tax attributable to the appreciation, and the basis for loss would be the lower of the grantor's basis or the value as of the date of the gift.

Absent something that would cause it to be included in the grantor's estate, the basis would remain the same upon the grantor's death. However, if there was something in the trust that caused it to be included in the grantor's estate, the basis upon the grantor's death would be equal to the value as of his date of death, or the alternate valuation date if applicable.

Absent something that would cause it to be included in a child's estate and assuming it's not subject to GST tax at the child's death, the basis would not change by reason of the child's death.
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