Revocable Living Trust Tax Consequences | Estate Planning TV 006

What is a revocable living trust? Imagine a trust just like a box. You can pull whatever you want in the box. You can take anything out of the box anytime and while you are alive you are the person who is in charge of the box. You are the person who benefits from the box. Once you die, the person who is in charge of the box changes, the person that gets the benefit of the box changes but the person who wrote the rules is you and the rules stay. The person who is in charge of the box follows your rules and does whatever you say for the benefit of the beneficiaries.

There is no tax consequences for a RLT. While you’re alive, there is no tax consequences. This is specifically in the Washington State. In other states it’s probably the same. Anything that you put into the RLT while you’re alive is treated as your own it’s seen as your own and not seen as held by a different entity therefore there is no tax advantages and tax disadvantages. You can put your house in there and there’s no transfer tax, no capital gains tax. You can put property, securities or anything you want in there and see no tax adverse or tax consequences or advantages. Once you die, however, and your trust becomes an irrevocable trust, then there are some different tax treatments.

Christopher Small is the owner of CMS Law Firm LLC a Bellevue estate planning law firm. Click here for a free strategy session.