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Basis step-up for assets in living trust after grantor death

Posted: Sun Apr 01, 2018 1:12 am
by Avo
My father-in-law Abe recently passed. His assets, including various mutual funds, were in a living trust, with Abe as grantor and his daughter Becky as trustee. Becky wants to sell the mutual funds now, and deposit the cash into a bank account in the name of the trust, for later distribution to Abe's heirs.

Question: would the step-up in basis apply in this situation?

Or do the mutual funds have to be distributed to heirs "in kind", and then sold, in order to get the step-up?

I've not found a clear answer to this in my searches, thanks for any help.

Avo

Re: Basis step-up for assets in living trust after grantor death

Posted: Sun Apr 01, 2018 6:39 am
by Gill
There is clearly a step up in basis to date of death values. They can likely be sold immediately for little gain or loss.
Gill

Re: Basis step-up for assets in living trust after grantor death

Posted: Sun Apr 01, 2018 4:41 pm
by Avo
Thank you!

Re: Basis step-up for assets in living trust after grantor death

Posted: Sun Apr 01, 2018 6:00 pm
by Murgatroyd
From a practical and tax basis standpoint it’s best to wait To sell until the financial provider changes to the step up values. Reason is if you sell before They could register the sale against the original basis and show larger gains. This will be profit to the trust.

This happened with my FIL’s estate. It was complicated and we just paid tax on that gain.

Re: Basis step-up for assets in living trust after grantor death

Posted: Sun Apr 01, 2018 6:07 pm
by LarryAllen
Murgatroyd wrote: Sun Apr 01, 2018 6:00 pm From a practical and tax basis standpoint it’s best to wait To sell until the financial provider changes to the step up values. Reason is if you sell before They could register the sale against the original basis and show larger gains. This will be profit to the trust.

This happened with my FIL’s estate. It was complicated and we just paid tax on that gain.
That's a good thought. Shouldn't take but a couple weeks after you notify the brokerage of the death and ask them to update. Keeping things simple for the IRS is smart.

Re: Basis step-up for assets in living trust after grantor death

Posted: Sun Apr 01, 2018 9:20 pm
by FIREchief
Yep. Good thing for you folks with "death books" to note. "Ensure that brokerage steps up basis before selling any assets."