[scmitc]

Trying to decide if our current wills are sufficient or whether we need to go through the hassle of setting up a trust. The only asset we have is our house. Our will says that all assets are to go to our two children in equal shares. My children have no intention of moving out of the state and would GLADLY move into our house if something should happen to us.

I'm assuming that they would not have to pay any capital gains tax unless they decided to sell the house upon our death - correct? Is there a time-requirement of them living in the house to avoid ever having to pay capital gains on it? If one or both of them were to live in the house for 2 years as their primary residence, would they never have to pay capital gains?

Any clarification on this would be appreciated. We live in Arizona, both of our kids are adults and the house is worth about $350,000.

Thanks!

[AtlantaTaxExpert]

Actually, they probably would not have to pay capital gains even if they DID sell the house after your deaths.

You see, the basis for the house is "stepped up" to the current Fair Market Value on the date of your death. Any capital gains between the original purchase price and the stepped-up FMV is forgiven!

Assuming they sell the house about a year afer your death, there would be some gain, but that would probably be completely offset by the cost of the sale. They may even show a paper loss on the sale.

In my opinion, no trust is needed.