Question
Stepped up basis for home in irrevocable trust with life estate?
Clients parents purchased their home in Hawaii in the 1940’s. In 2009 they transferred the home to an irrevocable trust (form Medicaid purposes) but retained a life estate. The clients’ father passed in 2013 and mother passed in 2026. If the client sells the home can he receive a stepped up basis to 2026 FMV?
My research seems to have conflicting outcomes. A home in a irrevocable trust generally does not get a stepped up basis. But I ran across a Section 1014 rule that appears to say since there was a life estate the home reverts back to the parents estate upon the last survivor’s death and therefore is eligible for the stepped up basis.
Does anyone have experience with this as to basis?
