Legal Question in Wills and Trusts in California

Re: Taxation of property, once trust is set up

Assuming you are in California, are married, and are asking about property taxes, putting the property in a revocable living trust will not trigger Proposition 13 reassessment. After the second spouse dies, whether the property is reassessed depends on who receives the property. Generally, if the property passes to a child of the couple, the property will not be reassessed. The best way to make sure is to call the tax assessor's office in your county, ask them about the proposed transaction, and make sure you comply with the county's rules.

Re: Taxation of property, once trust is set up

The answer is: "it depends." For California real estate going into a revocable living trust, property taxes and income taxes should not change.

Most other assets' taxable status does not change either, as the assets are still treated as your property. However, some assets like retirement plans and IRAs do cause immediate taxation if they are transferred to a trust, so check with your attorney before transferring any property.

At death (or when the trust becomes irrevocable), the assets in the trust are subject to estate tax, and any income the trust earns after death is taxable to the trust, with some exceptions.

Re: Taxation of property, once trust is set up

Does not change since there is no sale if you transferred title by a quit claim deed.

At death there is no change because the trust owns the property. At the sale of the property the trust will may to pay capital gains on the sale over the original basis in the property, however there are certain tax breaks and deductions which apply depending on your situation. As long as the trust keeps the property there should not be any change in tax.