Before we get into the concept of the step-up in basis, we should explain some of the reasons why you may want to use a living trust as the centerpiece of your estate plan. First of all, you do not have to be afraid of the word “trust.” Many people think that you sever your direct relationship with your assets when you create any type of trust. This is not the case with a revocable living trust.
You as the grantor of the trust you can maintain control of the assets throughout your life. After all, when you look at the name, you can see that you have the right of revocation. You can dissolve the trust entirely at any time, and it would no longer exist.
The grantor of the trust can also act as the trustee throughout his or her life. As the trustee, you control the assets, and you can also act as the beneficiary and receive distributions.
There is no loss of control on any level, and this can be comforting to many people.
You name a successor trustee to take over after you die when you create the trust agreement, and you name successor beneficiaries. After your death, the trustee will follow your instructions and distribute assets to the beneficiaries in accordance with your wishes. These distributions would take place in a timely manner, because they would not be subject to probate.
Spendthrift protections could also be included with a living trust, and you could allow the successor trustee to administer the trust in the event of your incapacitation.
Step-Up in Basis
Now that you understand some things about living trusts, we can look at the question that serves as the title of this blog post. Appreciated assets in a living trust would get a step-up in basis. This means that the beneficiaries would not have to pay capital gains taxes on the appreciation that took place during your life if you fund a living trust with appreciated assets.
This is a big advantage, because the tax would have never been applied during your life.
Free Report on Living Trusts
We have provided some basic information about living trusts and the step-up in basis in this blog post. However, if you have some interest in creating a living trust, you probably have a few questions.
If you would like to learn more about the value of revocable living trusts, we have a valuable resource that you can access quickly and easily through this website. Our firm has prepared a series of free special reports, and one of our reports is dedicated to living trusts.
Click this link to obtain access to your copy: Living Trust Report.