Taxpayers were married over 30 years and lived in a community property state.
A revocable trust provides for a bypass trust [B] upon the death of the first spouse, wife died November 2009. Community property consisites of the personal residence FMV $1,000,000, residential rental property FMV $2,000,000, stocks and mutual funds FMV $2,000,000.
I have learned that passive loss on rentals, [ as a result of stepped up basis] will not pass through to the survivng spouse if the rentals are used to fund the [B] trust.The passive loss remains in the [B] trust until the rentals are sold, or the assets distributed to the beneficaries upon the death of the surviving spouse.
The trust document provides for distribution of all income at least annually,[Capital gains at the discretion] of the survivng spouse.It would seem that the main disadvantage of funding the [B] trust with stocks and mutual funds, would be tying up principal that may be needed by the surviving spouse.
Surviving spouse is 60 years old and lives on income from the rental property and investment income. If this were your client how would you fund the [B] trust? Your thoughts on the subject will be appreciated. Thanks for your time. Bob
A revocable trust provides for a bypass trust [B] upon the death of the first spouse, wife died November 2009. Community property consisites of the personal residence FMV $1,000,000, residential rental property FMV $2,000,000, stocks and mutual funds FMV $2,000,000.
I have learned that passive loss on rentals, [ as a result of stepped up basis] will not pass through to the survivng spouse if the rentals are used to fund the [B] trust.The passive loss remains in the [B] trust until the rentals are sold, or the assets distributed to the beneficaries upon the death of the surviving spouse.
The trust document provides for distribution of all income at least annually,[Capital gains at the discretion] of the survivng spouse.It would seem that the main disadvantage of funding the [B] trust with stocks and mutual funds, would be tying up principal that may be needed by the surviving spouse.
Surviving spouse is 60 years old and lives on income from the rental property and investment income. If this were your client how would you fund the [B] trust? Your thoughts on the subject will be appreciated. Thanks for your time. Bob