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Irrevocable trust and cost basis of assets

Forum|Forum|3 years ago
March 11, 2023
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My mother created an irrevocable trust and she is still alive. Do the assets get a step up in value when placed in the trust? I am trying to determine fair value.

Best answer by Anonymous_

It depends upon the trust itself.

Typically, the assets placed into a trust will receive a stepped-up basis on the date of death of the grantor.

However, whether the basis is stepped up to fair market value on the date of death is entirely dependent upon whether the assets in the trust are included in the decedent's estate (for estate tax purposes and it does not matter whether estate tax is actually owed).

If the assets are placed into the trust to remove them from the grantor's estate, then there is no stepped-up basis on the date of death.

A

Anonymous_Answer

Employee

It depends upon the trust itself.

Typically, the assets placed into a trust will receive a stepped-up basis on the date of death of the grantor.

However, whether the basis is stepped up to fair market value on the date of death is entirely dependent upon whether the assets in the trust are included in the decedent's estate (for estate tax purposes and it does not matter whether estate tax is actually owed).

If the assets are placed into the trust to remove them from the grantor's estate, then there is no stepped-up basis on the date of death.

D

demitx475Author

Hello,

They were removed from the grantors estate. The trust pays the taxes on any gain. So would they be stepped up from the date they were put in the trust or not at all? Thank you so much.

A

Anonymous_

Employee

The assets are a gift to the trust (actually, the beneficiary(ies). In an IDGT, the grantor is still treated as the owner for federal income tax purposes, but not for estate tax purposes.