Phoenix, AZ asked in Estate Planning for Arizona

Q: Mom & husband were married. Their house was in a trust. He passed away. Mom lived there a couple more years alone.

Trust stated that upon sale of house, she receive 50% of the proceeds and 4 adult kids (2 from his previous marriage and 2 from hers) receive the other 50% of the proceeds divided evenly. She sold the house and is still living. Is this considered inheritance for the kids?

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1 Lawyer Answer
Ilene L McCauley
Ilene L McCauley
  • Estate Planning Lawyer
  • Scottsdale, AZ
  • Licensed in Arizona

A: Based upon the information you provided, the distribution is an inheritance to all parties.

However, there is more information you need to know. Even though the asset is an inheritance, there may be capital gains tax which must be paid upon the sale of the house. The house got a new basis when your mom's husband died. The difference between the value of the house on the date of his death and the sale price of the house, if it is greater, will be capital gains. The gain will either be paid by the trust, or it can sometimes be divided between the recipients. 1/2 to mom. 1/2 to her husband's children. There is no way for me to know. My advice is to work with a qualified CPA who understands trust accounting to calculate the capital gains, and how the the capital gains tax will be paid. I strongly urge you not to do this yourself.

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