Taxes on assets in a revocable living trust
Dear Tax Talk,
Do I have to pay taxes on money left to me as part of my friend's revocable living trust after she died? Its value is $70,000.
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No, you do not need to pay taxes on the money left to you as part of your friend's revocable living trust. Not only was she a generous and good friend to you, but she was a very wise person to have used this type of trust to transfer her assets at her death.
Revocable living trusts are effective in transferring assets without going through the lengthy and costly process of probate. Probate is a legal process handled by an attorney through the courts. During her lifetime, your friend had complete control over whatever assets were transferred into her trust. Many people transfer not only financial assets such as bank accounts and brokerage accounts, but also real estate such as their homes and other properties. Upon her death, the property transferred to the beneficiaries named in her trust document. This was a much easier process than if she had left the money to you in a will.
Anyone considering setting up a trust should use the services of a good estate and trust attorney to prepare this very important document. Once the attorney has all the relevant facts for an individual, a trust document can be tailored to fit the particular situation at hand.
Thanks for the great question and all the best to you.
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