Living Trust May Not Be Tax-Saver
Question: I am a recent widow. A few years ago my husband and I had a revocable living trust made. Our property--due to inflation--is worth at least $600,000. After my death, will our children have to pay inheritance tax on any monies over the $600,000, or will the living trust take care of this problem?
Answer: Depending on how your trust was designed, your children probably will have to pay the tax, and it is quite hefty, more than 30% of the excess. A living trust does not, by itself, preclude the imposition of federal estate tax. It does avoid probate fees. If my mail is any indication, many people seem to be confused about this issue and mistakenly believe that a living trust avoids estate taxes.
With the help of a lawyer, a married couple can design a trust or a will in such a way that they each may eventually transfer $600,000 tax-free to their heirs, for a total of $1.2 million. But the heirs will have to pay tax on amounts in excess of that.
You can use gifts during your lifetime to reduce the tax liability that will hit your heirs. Any person is free to give a gift, tax-free, of up to $10,000 per year to another person. Some wealthy elderly individuals make annual gifts to reduce the total value of their estate and thus lower the estate tax their heirs will later pay.
Both husband and wife may each give a $10,000 gift, so one child could receive $20,000 tax-free, every year. And some couples effectively double that amount by giving $20,000 each to a child and his or her spouse.
Q: As a landlord, I deal with a great variety of tenants. Sometimes, I am extremely fortunate to have a tenant move out and leave the house in spotless condition--ready to immediately re-rent. Other times, tenants are not really effective in restoring the premises to the cleanliness that prevailed at the commencement of the lease. It then becomes necessary for me to hire a housecleaning service to do the balance of the cleaning. Now the question: Do I take my lumps for the rental time lost while the professional cleaning is taking place or may it be legitimately charged to the ex-tenants as extended rent deductible from the security deposit?
A: Take your lumps. The Civil Code specifically lists the legitimate purposes that a residential landlord may charge against the security deposit, and rent for the time a cleaning crew is in the premises is not one of them. Deductions can be made for default in the payment of rent, repairs to the premises, cleaning, and broken promises to return personal property. A landlord cannot charge for ordinary wear and tear, or pre-existing damages.
That’s what the statute says about your question, anyway. Of course, judges always interpret statutes in unpredictable ways, and you might be able to find a creative, client-hungry lawyer to test your theory. But I haven’t heard of any cases along the lines you suggest.
