When your time ends, costs such as tax collection eat away at your family’s legacy. Preserving money for your family’s welfare, community property trusts can reduce the price of taxation and minimize the amount of money “donated” to the IRS.
How does a community property trust (CPT) work?
CPTs “step up” the basis of the entire property after death of a spouse. When you and your spouse invest in property jointly, the assets become community property if you live within one of nine applicable states, including California. However, two states, Alaska and Tennessee, permit the creation of a CPT, even if you do not live in a community property state.
When working on a CPT with an estate planning attorney, couples can take advantage of a double step-up on the property’s basis. The basis of the entire property, including both spouse’s halves, is stepped-up to its current value.
In contrast, jointly owned property only receives the step-up on one-half of the asset. Therefore, CPTs lower capital gains taxes by increasing the basis. When a spouse dies, community property can reduce income taxes for the decedent’s loved one.
Basic CPT Terms
To figure out whether or not a community property trust is right for you, you should know a few basic terms:
Whether or not you use a CPT, taking time to plan your estate is a small price to pay for the invaluable peace of mind you and your family gain. Within a brief period of time, we can implement an estate plan that could save your loved ones tens of thousands of dollars down the road. To prepare for the future, an estate planning attorney can help you customize a plan that is right for you.
Disclaimer: All materials have been prepared for general information purposes only. The information presented is not legal advice, is not to be acted on as such, may not be current at the time of review, and is subject to change without notice. Further, the publication forms no attorney-client relationship and is not intended as a solicitation. If the information provided might apply to your situation, you should seek qualified professional counsel on your specific matter.