Danville, CA asked in Estate Planning for California

Q: If I put a house valued at $7.0M with a $4.0M mortgage into a bypass trust, is my heir subject to estate

tax on the amount above $5.49M or is it tax free as the asset is only worth $3.0m ($7.0 - $4.0M)?

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2 Lawyer Answers

Sally Bergman

  • Estate Planning Lawyer
  • San Mateo, CA
  • Licensed in California

A: It is difficult to respond to your question without knowing considerably more information. Generally speaking, however, placing any asset into a bypass trust that may substantially increase in value, can cause a loss of step-up in basis at the time of the death of the second individual who created the trust. As you are in the range of a potentially Federal taxable estate, there is no question that you you should consult with an experienced estate planning attorney who has experience in working with potentially "high net worth" individuals. I don't believe any attorney could competently respond with any helpful advice other than to say, "See a professional!".

Ben F Meek III agrees with this answer

Elroy Schneider

  • Estate Planning Lawyer
  • Oxnard, CA
  • Licensed in California

A: If the bypass trust was properly set up, there will be no estate tax regardless of the value.

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