I appreciate your feedback on my previous post. It was very helpful.
A follow-up:
- Currently, Trust B (Credit Shelter/Family Trust) is comprised of various stock. My mother is successor trustee of Trust B which was my father's trust until he passed away. My sister and I will be surviving trustees upon the passing of my mother.
There are some winners and losers in the trust's stock portfolio. The winners participate in dividend reinvestment. Of course, the dividends are taxable. Ideally, we would prefer to reinvest those dividends. In order to offset this income, we would like to sell the losers. Say stock A had $5,000 basis and we intend to sell at $1,000. This is $4,000 loss. Can it be used to offset income generated from the good stock?
- Withdrawing from trust: given that my Mom is successor trustee and assuming she has the legal power to withdraw from trust B, is she taxed when making a principal withdrawal? Say she wants to withdraw $5,000. She sells stock A with basis $5,000; therefore no loss or gain.
I assume principal withdrawal is not taxed.
- Eventually, my sister and I will be trustees. In the same scenario above, is there any tax imposed? If so, at what rate? I would think that there shouldn't be tax because if there was, then what would be the benefit of Trust B.
- My mother's Bank Accounts are titled in her name only and set-up as Pay-On-Death. My sister and I are the beneficiaries. As I understand, when she passes, the transfer of monies in those accounts goes to the beneficiaries and bypasses probate.
Would we have to pay any tax on the transfer of these funds?
If tax is due, would re-titling the bank accounts in her Trust account with my sister and I as successor trustees reduce or eliminate any tax when she passes?
Thanks and enjoy the weekend!
Gene