Conference nyoss1::market_investing

    Here's my understanding, based on the books I've read:
    
    1.	You can avoid probate by gifts or trusts (may be more ways, too).
    
    2.	Up to ten thousand dollars per giver per recipient per year may
    	be given without gift tax liablity (e.g. two parents can give a
    	child and a spouse fourty thousand a year).  If you wish, you may
    	give more and either pay gift tax or use up your $600,000 exclusion
    	from your future estate taxes.  Since gift and estate tax rates
    	are similiar, it's usually best to take the second option, as it
    	defers the tax (time is money, etc.).
    
    3.	Gifts are not income, and you pay no tax on them.
    
    4.	Gifts given "in anticipation of death" don't get this exclusion,
    	and are counted in the estate.  The IRS assumes anything given in
    	the last three years before death are such gifts _unless_ there
    	was no reasonable expectation of death (e.g. parent dies at 45 of
    	a car wreck)--I think there may also be an exception for gifts which
    	are part of a "regular plan", so if your parents have been giving
    	you $40K each year for 20 years, the last three don't count as part
    	of the estate--but you'd have to check on that.
    
    Unless your parents are _very_ rich and quite old, they are legally
    able to transfer basically all the money they want to you.
    Various trust plans can maximize the use of the the $600,000
    exemption that _each_ parent has.  Consider two parents giving the max
    yearly to a child, spouse, and two kids and maxing out on the
    exemptions can give a grand total of $3.6 million without gift tax
    or estate tax over thirty years.
    
    The usual problem is that parents don't want to give it all away
    while still alive, leaving large estates, and they don't want to
    write wills.
    
    In any case, your parents should consult an estate lawyer for details,
    as states vary in things like inheritance taxes.  They might also
    want to consider a move to a low-tax state, depending on where they
    live now.
    
    			-John Bishop

                
    
    Hi, any information about living trusts will be appreciated.
    
    Several years ago my father's house was transferred to the 4 children
    as a living trust (for him).  He is now 86 and has been living in a
    rest home for over a year.  He does not want to live at home again
    (and medically, couldn't) and he wants the children to sell the house.
    It has been vacant during this time.  He also has gone through all his
    money > $125,000 for nursing home costs (my mother has been in a
    nursing home for 3 years).
    
    The house is very old and will definitely need $$$ to maintain it for
    several more years, especially being vacant.  We could rent it, but
    again, we would need a lot of $$$ to update it, and still the house
    would not be worth much more adding the additional costs (big ones)
    to repair the house.  All family members would like to sell the house.
    
    Can we do this now since the property was transferred to the children
    (all would pay their share of captial gains) and the transfer was set
    up a  living trust, which was recommended to the family?  I do not
    know what the tax liabilities would be -- capital gains, estate or
    gift tax, or the State (Mass.) takes the house and we all pay taxes
    plus lose the house?  This is all very confusing and I wish that we
    had never taken this advice.  I would never recommend living trusts
    for older parents (including yourself, as you will be one some day).
    It is not worth it.  The old adage is true, the only thing that is
    certain is death and taxes.
    
    Eleanor

    re .-1
    
    >Several years ago my father's house was transferred to the 4 children
    >as a living trust (for him).
    
    This phrasing is technically likely to be incorrect. The assets in a
    "living trust" are owned by the 'writer'/'owner' of the trust (I forget
    the legal term). They could not have been transfered to the
    "benficiaries" of the trust and still be part of the living trust.
    
    So I suspect your father still owns the house. Therefore he can simply
    agree to sell it.  I believe the main points of a living trust are to
    allow the 'owner' of the trust to retain control of his assets unless
    he becomes incapacitated to do so (mentally or physically) and the
    trust explicitly outlines who may "take charge" of his affairs. 
    
    I don't know the legal implications of selling his house under the use
    of such a "take charge" situation. The money obtained from the sale
    would still belong to the trust (not the beneficiaries).
    
    Supposedly a main point of living trusts is to make it easier to pass
    the "residual trust" (inheritance, should the owner die), to the
    beneficiaries without Probate hassles. It may or may not save on
    taxes.  
    
    If it is your father's intention to sell the house and gift the
    proceeds  to the beneficiaries that should be easy to arrange. He may
    be able to use a 1 time $125,000 exemption on sale of a home to avoid
    taxes on the sale. 
    
    I hope this gives you a start on determining what you may be able to
    do. You should carefully understand what the living trust document
    says, first and probably will have to consult an attorney to interpret
    it.
    
    
    
    
    

    
    
    O.k., thanks, Jerry, for the info.  I can see that there is much I
    do not understand and needs to be explained to me by a lawyer.
    The only reference that I recognized was your mention of probate.
    That rung a bell.
    
    ems

    
    	Jerry, I had the wrong scenario - it is not a living trust.  The
    house was transferred to the children with "right of survivorship" for
    my father.  I hope I have stated this correctly.  So, the owners are the 
    children but my father has the right to live in the house, or, say -
    agree to rent the house.  However, now he says to sell the house, since
    he has been in a rest home for over a year and does not want to return
    home.  I was not sure of the legal or tax consequences and whether or
    not the family could sell it.  We really do not want to rent the house
    or keep it vacant for too long a period of time.
    
    	Regards,
    
    	Eleanor                                                         
    

    re: .-1
    
    I am not an attorney. You probably can find a book in a library that
    describes the basics of "trust type X"  whatever type it actually is.
    That may give you some basics. Then talk to an attorney.
    I suspect there are as many types of trusts and interpretations on
    what they mean as there are plants in the universe. Its not clear to me
    who gets the proceeds if the house is sold. That probably depends on
    how the trust is worded.
     
    
    If there are multiple owners of the house now who have to pay taxes on
    the sale, you should consult an accountant who has experience with the
    situation, or perhaps an attorney (presumably a trust attorney should
    be able to advise on tax consequences of such a sale). 
    
    If the attorney who drew up the trust is available, I'd go to him. He
    may not charge you for initial information or for an interpretation
    under the agreement. Try to find out from your father the business
    arrangement with that attorney first. If the attorney is long gone,
    you'll probably have to find a new one and pay to have him review the
    document.
    
    Good luck.
             

    
    The original attorney is long gone.  I wish that I had understood
    better at the time what the responsiblities and consequences would be.
    Sigh....hindsight.  I will contact an attorney shortly.  Thanks.
    
    ems

Could anyone  recommend  a  good book or resource that explains how to avoid
Estate  taxes?   In  particular,  I want to understand how to setup a living
trust before I see a lawyer.

Thanks!
Albert

If you're trying to avoid estate taxes, invest in DEC stock.  You'll die poor.