Legal Question in Wills and Trusts in Iowa
Purchasing land from a trust/Taxes on the proceeds
My husband and I bought our home from an older couple five years ago. As a stipulation to the purchase, we were given the first right of refusal on our purchase agreement for a portion of the other land owned by the couple. Now the wife has passed away and the husband, due to severe health problems, is no longer competent. Everything they have, including the land, is in a trust at the bank. Assuming the children are willing, is it possible to purchase a portion of the land out of the trust? Would this purchase remove our first right of refusal, should the children want to sell the remainder of the land in the future? Would the proceeds from the sale need to go directly back into the trust? Also, what would be the tax ramifications to the children/trust since the land is worth considerably more than its most recent appraised value? Thank you for your time.
1 Answer from Attorneys
Re: Purchasing land from a trust/Taxes on the proceeds
1. The Trust is normally free to sell assets if to do so is in the best interest of the beneficiaries.
2. A purchase of part of the lands in trust will not void the balance of the "first right" call on the rest of the land, particularly if the purchase instruments so state.
3. If you purchase from the trust, the sale proceeds will go to the trust. What happens to them from there is not a relevant question to the transaction.
4. Taxes to the trust will be the difference between the trust's basis in the land and the selling price. Typically taxes are significant for land which has been owned for a substantial period.
5. Taxes are a fact of life. There are few transaction which don't involve some tax impact.
Related Questions & Answers
Looking for something else?
10,200 active attorneys ready to answer your legal questions today.
Featured Attorneys
Earn additional revenue and grow your business.
