Asked in Estate Planning and Tax Law for Colorado

Q: A deed to a property goes into an irrevocable trust. Is the real estate taxable by the government?

Or is the property subject to the tax break the irrevocable trust receives?

Related Topics:
3 Lawyer Answers
D. Mathew Blackburn
D. Mathew Blackburn
Answered
  • Licensed in Colorado

A: Is the real estate taxable by the government? Yes.

Or is the property subject to the tax break the irrevocable trust receives?

It also would receive any tax breaks as well as being taxable.

It's still taxable when the tax assessed is $0.

That's going to depend on how the trust is drafted and what you mean by "tax break".

What tax are we discussing? Income tax, property tax, estate tax, gift tax, tax tax?

Marc Carlson
Marc Carlson pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
Answered
  • Estate Planning Lawyer
  • Castle Rock, CO
  • Licensed in Colorado

A: My understanding is that an Irrevocable trust must distribute all income to beneficiaries each year, which makes the trust a pass-through entity. Those beneficiaries pay the taxes on income. However, capital gains are not considered income to irrevocable trusts. Instead, capital gains count as contributions to principle in the tax code. The "estate tax exemption" applies to all property. These are good questions for confirmation by your CPA.

Marc Carlson
Marc Carlson pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
Answered
  • Estate Planning Lawyer
  • Castle Rock, CO
  • Licensed in Colorado

A: Irrevocable trusts must distribute all income to beneficiaries each year, which makes the trust a pass-through entity. Those beneficiaries pay the taxes on income. However, capital gains are not considered income to irrevocable trusts. Instead, capital gains count as contributions to principle in the tax code. You should confirm this with your CPA before taking any final action on the deed.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.