Living trust streamlines real estate inheritance

DEAR BOB: What is the best way to hold title to my residenceto avoid probate and also to get the step-up in cost basis? –Steve L.

DEAR STEVE: I presume you mean you want your heir to receivethe stepped-up basis to market value after you die.

Purchase Bob Bruss reports online.

The best way to hold title to real estate is usually in arevocable living trust. While you are alive you can buy, sell, refinance andmanage your living-trust assets because you are the trustor, trustee andbeneficiary.

However, if you become incapacitated, such as withAlzheimer’s disease or a severe stroke, or after you pass on, your successortrustee takes over and manages or distributes your living-trust assets asinstructed in your living trust.

After you die, your living-trust assets are distributedwithout probate costs or delays, according to your living-trust instructions.Your heirs then receive a new stepped-up basis to market value on the date ofyour death. More details are in my special report, “24 Key QuestionsAnswered: Living Trust Secrets Reveal How to Avoid Probate Costs andDelays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA94010 or by credit card at 1-800-736-1736 or instant delivery at


DEAR BOB: How can I avoid capital gain tax on the sale of myproperty? Will forming an LLC (limited liability company) do that? –Daniel J.

DEAR DANIEL: No. The purpose of holding real estate title inan LLC is not to avoid capital gain tax. The purpose is to avoid personalliability if someone is injured on your property.

If the property is your principal residence, you can avoidcapital gain tax upon sale by use of the Internal Revenue Code 121 taxexemption up to $250,000 (up to $500,000 for a married couple filing a jointtax return). To qualify, you must have owned and occupied your principalresidence at least 24 of the last 60 months before its sale.

If the property is held for investment or for use in yourtrade or business, the only way to avoid capital gain tax is to make anInternal Revenue Code 1031 tax-deferred exchange for another “likekind” property of equal or greater cost and equity. For details, pleaseconsult your tax adviser.


DEAR BOB: How can I get my half of the rental securitydeposit returned after I moved out but my ex-roommate chose to continue rentingpast the one-year lease expiration? –Douglas R.

DEAR DOUGLAS: Your ex-roommate, not the landlord, owes youthe security deposit amount you originally paid when you moved in. Because heremains in the rental property, he is using your 50 percent share of thesecurity deposit, plus his own 50 percent.

If he refuses to pay you the 50 percent to which you areentitled, take him to the local Small Claims Court to get a judgment for thesecurity deposit he owes you.

The new Robert Bruss special report. “How to BuyFixer-Upper Houses with Little or No Cash for Fun and Fortune.” is nowavailable for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or bycredit card at 1-800-736-1736 or instant delivery at Questions for this columnare welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006 Inman News

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