23 Feb What happens when I inherit a house that’s in a trust?

Q. My mom has a revocable trust. Her house is in it and I am the beneficiary of the trust. Upon inheritance can, I simply sell? I was told that taking it out of the trust and putting it in a life estate would give me a step-up benefit that the trust would not have. How much should it cost to remove the house from the trust and put in a life estate?
— Beneficiary

A. A lot will depend on the specifics of the trust.

That’s why we’re glad that you’re asking now.

If the trust provides that the property will pass outright to you, then, upon title being passed to you, you can sell it subject to any debts or liens that may have been placed on the property, said Jason Marx, chair of the Tax & Estate Planning and Elder Law & Special Needs Planning groups at Curcio Mirzaian Sirot in Roseland.

If the property passes in further trust for your benefit, then any sale would have to be consummated by the trustee of that trust, again, subject to any debts or liens that may have been place on the property, he said.

“If the property remains in the revocable trust, then upon your mother’s death, based on current tax law, the basis would be adjusted to the date of death value,” he said. “Because the property is owned by a revocable trust, and assuming your mother created that revocable trust, it is actually an asset that would be included in your mother’s estate. Therefore, the basis would be stepped up to the date of death value.”

In terms of what it might cost to take the home out of the trust and establish a life estate, it’s not so easy to say.

“It all depends on the attorney who prepares the documents necessary to retitle the property,” he said. “However, to achieve a step-up in basis upon your mother’s passing, it would not be necessary to retitle the property from the revocable trust.”

We recommend you speak to an experienced estate planning attorney who can review the trust and further advise you based on the specifics of your case.

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This story was originally published on Feb. 22, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.