Q: My mother currently owns her home and would like to place it in a trust. She wants the property to avoid probate when she dies and instead pass directly to me, her only son.
If she creates the trust, is it possible for me to be the executor of the trust as well as the beneficiary or does she need to have someone else be the executor (such as my wife)?
Otherwise would be better off with a quit claim deed? Thanks!
A: Due to the potential tax liability when you sell, you’re almost never better off quit claiming property versus inheriting it after the owner has passed.
If your mother quit claims the property to you, you’ll receive it at her cost basis. When you sell, you’ll pay capital gains tax on the difference between her cost basis and the sales price.
If you inherit the property, you’ll inherit it at its current market value as of the day of her death. If you then turn around and sell it, you shouldn’t owe any tax whatsoever.
Unless this is prohibited by state law, you may be able to be the executor of the estate and a trustee of the trust as well as a beneficiary. Another options is to have your mom be the trustee of the trust until her death and then you could become the successor trustee.
Since you’re dealing with trusts, the best thing is to pay for an hour or so of an estate attorney’s time to look over your documents and make sure your plan meets all of your mother’s needs.
July 22, 2007.