trust/bright-line implications

[alaska]

If I wanted to wind up a family trust and put the house back in my name, would this leave me open to the bright line test if the property was sold. Held the property for over 10 years and the financial company as trustee, is listed on the title. Thanks in advance for any advice. - main reason is to remove the trustee company from the title before the sale so I don't need their signature on all documents.

[donna]

If you're selling once a property held for more than 5 years then I'd assume not. But if you sell and then want to sell it again in less than 5 years then yes.

cheers,

Donna

[artemis]

Not a lawyer but I understand that transfer from a trust to you counts as a sale. As the property has been owned by the trust more than 2 years (current rule, moving soon to 5) then the bright-line test does not apply.

If you then sell then the bright-line test (2 or 5 years) will apply unless it is your family home.

If you have 'bought' to re-sell then you may come under the IRD's definition of a trader, in which case tax is payable on capital gains anyway.

[alaska]

thanks all - should have added that it was the family home and is now vacant and will be looking to sell.

[artemis]

Suggest check though. A trust is not a person / family and in any case you will be 'buying' a vacant property. May be simpler to leave the trustee company there until sale is complete.

[Anthonyacat]

thanks all - should have added that it was the family home and is now vacant and will be looking to sell.

If you're looking to wind up the trust, considered removing the trustee company as a trustee? That would solve your signing problem, No?

But to answer your question directly - Yes, selling from trust to yourself will absolutely start a new bright line countdown, but if you're looking to sell pretty soon, how much capital gain are you expecting? Get a nice high (but realistic and justifiable) valuation to sell from trust, and you might end up in a break even or loss position; no bright line tax.

[Rosco]

If I wanted to wind up a family trust and put the house back in my name, would this leave me open to the bright line test if the property was sold. Held the property for over 10 years and the financial company as trustee, is listed on the title. Thanks in advance for any advice. - main reason is to remove the trustee company from the title before the sale so I don't need their signature on all documents.

Your plan - Trustee company has to sign documents to sell property to you, or documents to wind up Trust. So one lots of costs and some legal costs for documents etc. Then you sell, so 2nd lot of legal costs, plus brightline hassle.

Why not just sell as is - Trustee company has to sign documents to sell property, and some legal costs. Then simple distribution (should be tiny legal or trustee company costs). Or should you be keeping your assets in a Trust anyway?

Ross