Learn how trusts can protect your family from unexpected tax burdens.
Have you ever wondered what happens to your house or property after you pass away? Having a loved one pass away is heartbreaking for family members, and even more so when they have to deal with costly and lengthy legal processes revolving around your estate. It’s important to understand how taxes work when you leave property to your family. Joining me today is Zack Whitman, a highly skilled lawyer specializing in trusts and wills, to explain how this works and what your best options are in safeguarding not only your property but also your family. Here’s what you need to know:
Federal estate tax. First, there’s something called the federal estate tax, or "death tax." The good news is that most people don’t have to pay for it. This tax only applies if your estate is worth more than $13 million per person. So, if you and your spouse have less than $26 million, you don’t need to worry about this tax.
Capital gains tax and property value. When someone inherits your house, they get what’s called a "step-up" in basis. This means the value of the house is adjusted to what it’s worth the day you pass away. For example, if your parents bought a house for $70,000 and it’s worth $1.5 million when they pass, your family won’t pay taxes on that $1.43 million gain. They’ll only have to pay capital gains taxes if the property keeps going up in value after they inherit it and then decide to sell.
"Avoid costly mistakes with smart estate planning and the right trust setup."
What a trustee does. When you set up a trust, you choose a person called a trustee. This person will handle your property when you pass away. They’ll work with professionals like certified public accountants and lawyers to make sure everything is done right. This includes figuring out taxes and making reports. Your trustee can use money from the trust to pay for these services.
Grieving the loss of a loved one is one of the most painful experiences anyone can have. If you’ve been named a trustee or are setting up a trust, it’s important to know how things will work. If you have any questions about this topic, call or text us at 760-201-9252. We’re always here to help you and your family.
