Gift Tax Exclusion
- The proceeds from the sale of a house by a living trust may be completely excluded from gift taxes if those proceeds go directly to the spouse of the deceased. If the proceeds go directly to an educational institution to pay for someone's tuition, a medical institution to pay for someone's medical bills, a political organization or charity, they are also free of gift taxes. The living trust may also make a gift of up to $15,000 to each person without having to pay gift taxes.
- The IRS looks at the value of your entire estate, not just the proceeds from the sale of your house, to determine whether any estate taxes are owed after your death. Included in the value of your estate are any annuities payable to the estate or your heirs upon your death, the worth of any property your transferred to anyone else within three years before you died and any life insurance payouts due upon your death.
Estate Tax Deductions
- If any portion of your estate, including the proceeds from the sale of your home, go to your spouse, that amount is completely free of estate taxes. Also free from estate taxes is any money that goes toward paying off any of your debts or funeral expenses or contributed to a government entity or any charitable organization registered with the IRS.
- The IRS grants a unified credit on both estate and gift taxes that may apply to the proceeds gained from the sale of a house under a living trust. An individual has only so much unified credit. If the deceased had used a portion of his credit in previous years, the amount his estate qualifies for after death is reduced. As of 2009, the unified credit for taxable gifts was $345,800 and allowed an exclusion of up to $1 million. The unified credit for estates totaled $1,455,800 and allowed an exclusion of up to $3.5 million.