another trust question

[JOHNNIE36]

I am in the process of setting up a revocable family trust. A question just popped into my mind this morning and can't wait to get an answer to this one. I can't see my attorney until Tuesday and this is driving me nuts. The question involves transferring our home into the trust. Attorney has already prepared a "quit claim deed". My problem and question: We closed on the purchase of our home on 12-30-09. We got a tax credit of $9000 for a first time home buyer. Part of the requirements for this credit is that we have to keep it for three years which means until 12-30-12. I'm wondering if the change from us owning the home to the trust owning the home would constitute a change in ownership and would violate this three year requirement? I would appreciate and thoughts and comments.

[HpRyder]

Quote:

Originally Posted by JOHNNIE36 I'm wondering if the change from us owning the home to the trust owning the home would constitute a change in ownership and would violate this three year requirement?

No, as long as both are initially the trustor & trust beneficiary. No notification of this change will be sent to any organization, so unless they check the recorders office they'll never know.

[donheff]

We set up revocable family trusts but our houses remain in our names (one in mine, one in DW's). The respective houses go into the trust upon our deaths.

[HpRyder]

Quote:

Originally Posted by donheff We set up revocable family trusts but our houses remain in our names (one in mine, one in DW's). The respective houses go into the trust upon our deaths.

Interesting, will the transfer to trust titling be via unprobated will or automatic as in Joint Tenants With Right Of Survivor (JTWRS). Will the step up basis also transfer?

Just curious.

[donheff]

Quote:

Originally Posted by donheff We set up revocable family trusts but our houses remain in our names (one in mine, one in DW's). The respective houses go into the trust upon our deaths.

Quote:

Originally Posted by HpRyder Interesting, will the transfer to trust titling be via unprobated will or automatic as in Joint Tenants With Right Of Survivor (JTWRS). Will the step up basis also transfer? Just curious.

Good question, I don't actually know. The provisions of the trust become binding when we die. I assume the will and the trust serve as the documents that authorize the trustees to take action with respect to the houses and financial accounts. Just like a will leaving a house to your kid would authorize the kid to sell the house or take title for himself?

If DW dies before me, the house we live in will go into trust for the kids with me controlling the trust until I die. I would not expect to do anything with the house title in the meantime but I will check to see if there are any mechanics. I'm not to worried about the trust itself being solid. The top trust attorney in DWs firm drew it up after extensive discussions with us about what we wanted to accomplish.

[JOHNNIE36]

Quote:

Originally Posted by donheff We set up revocable family trusts but our houses remain in our names (one in mine, one in DW's). The respective houses go into the trust upon our deaths.

Very interesting! Guess I'll defer until I can meet with our attorney. I am just worried that if we utilize the quit claim deed, as the attorney has prepared, the IRS could look at this deed change as a change in ownership. They probably wouldn't ever know, but they could. I understand that we still have control and could eventually sell the house should we decide to go into a condo in our "old age" (downsize). The deed change now just has me worried.

[HpRyder]

Quote:

Originally Posted by JOHNNIE36 Very interesting! Guess I'll defer until I can meet with our attorney. I am just worried that if we utilize the quit claim deed, as the attorney has prepared, the IRS could look at this deed change as a change in ownership. They probably wouldn't ever know, but they could. I understand that we still have control and could eventually sell the house should we decide to go into a condo in our "old age" (downsize). The deed change now just has me worried.

No the IRS will not consider the transfer to the trust as a taxable event. They will still view you as owners.

Usually the trust will define who dies first if, if "simultaneous" deaths occur (for example you are both on an airplane crash). But then the trust has become irrevocable and no terms can be altered. So I think you should ask your trust attorney how the house becomes titled in the name of an irrevocable trust when both trustors are deceased "simultaneously"?

[JOHNNIE36]

Quote:

Originally Posted by HpRyder No the IRS will not consider the transfer to the trust as a taxable event. They will still view you as owners. Usually the trust will define who dies first if, if "simultaneous" deaths occur (for example you are both on an airplane crash). But then the trust has become irrevocable and no terms can be altered. So I think you should ask your trust attorney how the house becomes titled in the name of an irrevocable trust when both trustors are deceased "simultaneously"?

We have covered that issue because our son will be the trustee when DW and I pass away. Until that time, we control the trust. By the way, I decided today to try calling the IRS about the house question. Very nice lady gave me all the information I needed and I went to the IRS.gov website and printed out the "instructions for form 5405" which confirmed everything she said. Changing title to the house means nothing as long as we maintain it as our primary residence. People change ownership and title to property frequently. Just have to keep living in it at least until 12-30-12.

[PaddyMac]

"Usually the trust will define who dies first if, if "simultaneous" deaths occur (for example you are both on an airplane crash)."

Is there a good definition of "simultaneous"? We need to work on our will, but because we have no kids, we don't want one family to get it all if both of us are injured, but one dies days or weeks before the other etc.