You’re not safe. At some point when the IRS realizes that it moved from you to the other individual, there’s a gift tax and most of the time it’s found after the fact and so they’re going to charge penalties and interest on it. So now that’s one piece of estate, state, whatever it was that you were trying to pass on to your children to give them a better life or give them some type of advantage is now going to cost them a lot of money in taxes for great Trust Attorney Las Vegas.
It might cost them more than what they got it. It really can turn into a problem if you don’t do it properly. Anybody that has any decent amount of wealth. Now if this is the grandma that just lives at the house with me and she just has a bank account and there’s not very much left. Yes, of course, she doesn’t need to worry about setting up a trust with top Trust Attorney Las Vegas. But if the minimum thing you had was a house and you have some equity in your house, that alone, I would strongly recommend getting a trust in place and having a set of properly. Do not try to transition that to yourself. It is a tax headache. Well and then can you talk about the capital gains implications of that? So let’s say we don’t have to worry about the gift tax cause, they don’t get caught or anything. But just from a pure capital gains standpoint, what does that look like if they give it away before they diverse is having the kids get it after they die.
So they have a cool thing called step up and basis. And when you have somebody that passes away, because if you’ve used trust and you’ve done it properly, there’s this idea that the estate tax is already covered that and there’s a very large exemption. And so for most people, let’s say all you have is a house with top Trust Attorney Las Vegas. Let’s say you had $300,000 with the equity in this house and it’s below the estate limit. So when you pass away, maybe you bought the house for $50,000, it gets what they a step up in basis. It’s now worth $300,000 if it’s in trust and we know that you died and we do the step-up in basis and then it transitions to one of your children and then the child sells it. Let’s say they sell it for 300,000 as soon as they get it, they sell it. And accept that same market price. They pay zero tax, zero tax if you do it properly, which is why I say if you have any substantial assets, even if it’s just a house, it’s worth having a trust cause the differences of you paying capital gains on $250,000 with the taxes.
Yeah. I just want to reiterate that for those of you who maybe went over your head the first time, if you gift it to your kids before you die, a gift means that whatever you paid for the house, that’s what their tax basis is. So if you paid 50,000 and you give it to your child, their tax base is 50,000 they turn around and sell it the next day for 300 they have to pay tax on that 250,000 in gain versus if you die and then they get the house, they pay no tax on that 250,000 so it can be a huge difference there with solid Trust Attorney Las Vegas. Yes, you’re trying to avoid having to pay the attorney and do all that, but guess what a trust is going to cost you $2,000 tax on $250,000 even if it’s capital gains is going to be more than $2,000 right, Trevor?
Yeah. So just at least talk to an advisor to make sure it makes sense what you’re doing it. The problem is, I think the theme we’re going over and over again is people try to do stuff on their own. They don’t know what’s going on and, and that’s when they get themselves into trouble. You know, you wouldn’t go and operate on your leg or your head. I know it seems like an extreme exaggeration for amazing Trust Attorney Las Vegas, but, the theory is the same. You have professionals in a specific industry who know what they’re doing and that’s why we have this podcast. We want you to know who a trusted advisor is, what they look like, what they sound like so that you can go talk to somebody so that you don’t get yourself in trouble. Uh, when you do, you know, there’s a lot of doing it yourself for is out there, you know, for home improvement.
Sure, that’s fine. You can do it yourself. If you make a big mistake, you know, whatever, it’s not gonna be a big deal. But we’re talking about, you know, taxes and the IRS and the government involved in getting sued and penalties and interest. That can be a huge nightmare that doesn’t affect just now that can affect your credit down the road, your ability to buy a home, to get a job, whatever those things are. So I just really want to emphasize that you do need to use somebody who knows what they’re doing. You don’t have to use one of us, you know, the podcast is here is education, but we want you to know what kind of things you should be looking for and asking your advisors for. So, um, the last question I have for you. You know, a lot of what we’ve talked about is avoiding the audit. But I think people have the top Trust Attorney Las Vegas in mind, um, blow the audit out of proportion and think it’s this big scary thing because it’s the IRS and you know, they’re the government entity. But I think, um, you know, my experience has been if you do get audited, if you’ve had a trusted advisor that did your returns and did them the right way, you don’t have anything to be scared of because you know, for your clients, you the audit, is that right?
Yes. So what does that look like? Just, you know, very briefly and um, you know, maybe why, why it shouldn’t be a big deal for people to be audited.
So again, using a trusted advisor with the right structure, my clients bring in all their tax support and paperwork. Now they might have a bunch of receipts. They ended up for deduction. I’m not going to charge them to add up the receipts. I will use the totals that they give me. So I’ll take the totals and I’ll do a proper return.