I assume she would be entitled to a CG exclusion b/c the property is (fortunately) less than the threshold for capital gains? Or perhaps there hasn't been enough gain over the period of ownership to reach the level of CG liability?
I'm a bit confused though. If the property would not reach the CG threshold when held by your mother, its value isn't going to change if it's held by the Trust. However, the tax rate would change, and drastically.
This is on the edge of my knowledge, so I'm only going to make suggestions on following through, as I think this clearly is an issue for an attorney with significant trust and tax experience.
You might have to do a breakeven analysis as to how much VA benefits she would lose vs. how much she could potentially get from a sale of the house.
What would be the benefit of conveying the house to the Trust? It seems as though it might become unavailable if she needed access to it.
If she sells the house w/o transferring to the trust, what would she use the money for? Would it be for reserves, or for a facility placement?
I'm just trying to sort out the easier issues from the more complex one of the house being subject to CG taxes.
There might be another issue as well - step-up in value. Is your father alive or deceased? If the latter, I believe the martial step-up in value of the house might mitigate the CG issue, but again, this is close to the edge of my knowledge, so I'm merely suggesting these issues for exploration. They're beyond my expertise and I don't want to lead you astray.
But, seriously, a trust and tax attorney needs to be involved in this consideration.
I might have a clearer conception of the issues later; this is the kind of question that needs to "gel" before I sort out all the issues.
BTW, did you ask the attorney who prepared the Irrevocable Trust about this issue?
If my mother sells property, she would be entitle to capital gain exclusion - however; her VA benefits would cease. If property is moved to trust and subsequently sold; then, trust would have to pay capital gain taxes. The issue is my mother needing the money prior to death and eliminate the issues owning another home.
Could you explain the issues underlying this question? I.e., if the real property is quit claimed to the Trust, which is the way it would be transferred and retitled as a Trust asset, I'm not sure why the tax basis would be relevant. Are you doing some type of asset inventory? Something else?
The value of the home would be relevant at death, and sale, then distribution of the proceeds to the heirs, assuming that the distribution provided for in the Trust.
I'm a bit confused though. If the property would not reach the CG threshold when held by your mother, its value isn't going to change if it's held by the Trust. However, the tax rate would change, and drastically.
This is on the edge of my knowledge, so I'm only going to make suggestions on following through, as I think this clearly is an issue for an attorney with significant trust and tax experience.
You might have to do a breakeven analysis as to how much VA benefits she would lose vs. how much she could potentially get from a sale of the house.
What would be the benefit of conveying the house to the Trust? It seems as though it might become unavailable if she needed access to it.
If she sells the house w/o transferring to the trust, what would she use the money for? Would it be for reserves, or for a facility placement?
I'm just trying to sort out the easier issues from the more complex one of the house being subject to CG taxes.
There might be another issue as well - step-up in value. Is your father alive or deceased? If the latter, I believe the martial step-up in value of the house might mitigate the CG issue, but again, this is close to the edge of my knowledge, so I'm merely suggesting these issues for exploration. They're beyond my expertise and I don't want to lead you astray.
But, seriously, a trust and tax attorney needs to be involved in this consideration.
I might have a clearer conception of the issues later; this is the kind of question that needs to "gel" before I sort out all the issues.
BTW, did you ask the attorney who prepared the Irrevocable Trust about this issue?
If property is moved to trust and subsequently sold; then, trust would have to pay capital gain taxes.
The issue is my mother needing the money prior to death and eliminate the issues owning another home.
The value of the home would be relevant at death, and sale, then distribution of the proceeds to the heirs, assuming that the distribution provided for in the Trust.