Rockford, MI asked in Tax Law for Maryland

Q: Are there tax advantages to our beneficiaries placing our assets, including our homes in a trust

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1 Lawyer Answer
Mark Oakley
Mark Oakley
  • Rockville, MD
  • Licensed in Maryland

A: Most tax advantages can be obtained with or without a trust, as the primary benefit of a trust is to adress other management and estate plannng purposes (such as avoiding the probate process, but in Maryland that is not always that significant of a reason). There are two types of trusts: revocable and non-revocable; and a revocable trust can be written to become on-revocable upon the death or incapacity of one of the grantor of the trust. There are potential tax differences bewteen revocable and irrevocable trusts, but most people are not interested in losing complete control over their assets during their lifetime by placing them in an irrevocable trust. Revocable trusts generally become irrevocable upon the death of the last grantor of the trust. The questions I have are: (1) where are you a resident; and (2) where is the property? You posted his for Maryland lawyer to answer, yet you list a Michigan location for yourself. You need to determine which jurisdiction's laws apply to any estate planning needs. In most cases, spouses who own their home as tenants-by-the-entireties can simply leave their home and assets by will to their children. Upon death of the last of the two spouses, the childen will inherit the house (or its sale proceeds from the estate) with a stepped-up tax basis equal to the FMV of the house at the time of death--meaning there will be no capital gains tax on the sale proceeds. The same tax savings result regardless of whether the house is in a trust or in your individual names. The federal estate and gift tax credit is almost $12 million dollars this year, although unless Congress adjust the current law, it will drop to $5 million in 2025. Maryland's estate tax credit is $5 million. That means, unless your estate exceeds the value of the credit, there are no estate taxes due. In Maryland, there are no state inheritance taxes on distributions to lineal heirs, step-children, siblings or spouses. Trust assets of the decedent are counted when determining any aplicable estate or inheritance taxes, so you cannot avoid them by simply transferring assets to a trust. However, as stated, most persons pay no estate taxes because their assets are below the tax threshhold.

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