I plan to purchase land to build a new home within the next year. I am receiving an inheritance in the form of a trust account; the account is in my name and I am also the trustee. I had planned to use this money to purchase the land. While I don't know how much the land will cost, we can estimate $200,000 for the purposes of this question. The inheritance is approximately $450,000.

However, I also have money in stocks, approximately $400,000, which is almost all gains. This money is planned to use for retirement (it is in a regular stock account, separate from my actual retirement accounts).

Is there any good reason not to use this money to purchase the land instead, and leave the trust intact for now? Things I have considered:

  • I would have to pay the capital gains tax on any stocks I sell, while the inheritance money is tax-free. (Though I would eventually have to pay that capital gains tax in the future when I retire anyway).
  • The money in the trust has various legal protections such as avoiding probate if I died.
  • The money in the trust can be invested exactly the same way I'm currently investing the other stock money, if I wanted to. I would likely purchase conservative mutual funds with it.
  • Whichever account I use to purchase the land; the other account is still there for retirement.

Due to point 2 above, I can't really think of a good reason to spend the trust rather than the stocks. Having to pay taxes shouldn't really be a consideration, because however much growth there is when I retire, I have to pay taxes on that anyway. Am I missing something in my consideration that makes it better to spend the money in the trust?

  • 4
    You seem to mix up a lot of things here. Whose trust is that? How are you "getting" it? You said you're trustee, but from the question it sounds like you intend to use it for your own benefit - are you the actual beneficiary?
    – littleadv
    Feb 14, 2023 at 22:15
  • @littleadv Sorry, I’ll edit to clarify, but I’m the trustee of my own inherited trust
    – GendoIkari
    Feb 15, 2023 at 0:38
  • Trusts can be set up so that capital gains, interest, dividends, etc. earned by the trust are taxed within the trust or paid out to the beneficiary who then owes taxes on that money. You may or may not get a stepped-up basis for capital gains taxes when you inherit the trust depending on how exactly it was set up. Feb 15, 2023 at 4:58

1 Answer 1


There's not a generic way to answer this simply as "stock vs. trust". A trust is essentially a separate legal entity, so there can be many details that would need to be considered. Are you the sole beneficiary? Are there any provisions in the trust as to what it can or can't be used for? Would the trust own the land or would you essentially "give yourself" money from the trust to buy the land in your name? Are there ant provisions in the trust that would prevent either of those?

The tax problem with the stocks should not be so quickly dismissed either. Yes you'll have to pay capital gains anyway, but you may need to do better tax planning. There may be ways to reduce taxes by selling over time that you can't use if you just liquidate it all. And flooding your income with all that capital gain in one tax year may cause other tax problems.

All that to say you can't get a great answer here - you need to talk to a financial advisor that can look at all of the specifics of your situation and the details of the trust to make sure you don't make a mistake that compounds the problems.

  • there's also the question of trust taxes - it's tax free now as a balance, but once it starts accumulating income...
    – littleadv
    Feb 14, 2023 at 23:31
  • I edited to add some clarity, but to add even more here, this trust was created specifically for me (a different trust with a life insurance policy split into separate trusts for each grandchild), so I am the trustee and the sole beneficiary of this particular trust. The money is as free to use as if it were cash in my regular bank account.
    – GendoIkari
    Feb 15, 2023 at 0:41
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    @GendoIkari 15%? with 400K income? More like 25%, add to that NIIT, Medicare and State taxes
    – littleadv
    Feb 15, 2023 at 0:50
  • 1
    long-term capital gains are 15% unless your income tax bracket is over 500k (married) or 460k (single), 20% if over that. Pretty sure there’s no Medicare or other taxes on capital gains, and they don’t affect your income bracket…
    – GendoIkari
    Feb 15, 2023 at 1:22
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    My main point is that there are too many variables specific to your situation to give a general answer. The answer is you need to speak with a financial advisor who can help with the tax and legal aspects of your situation and come up with a plan that will meet all of your goals.
    – D Stanley
    Feb 15, 2023 at 14:34

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