Integrating Community Property Trust Into Your Estate Planning
A well-crafted estate plan is comprised of many individual parts, and careful, trust-based estate planning is the best way to ensure the highest possible quality of life for you and your loved ones.
Posted on April 28, 2017
One way couples can make get the most mileage out of their estate plans is through community property trusts. This is a special type of trust that combines a couple’s jointly acquired assets as community property and can save a significant amount of taxes.
Why community property trusts are a great idea
The essential benefit of a CPT is that the basis of community-owned property is stepped up when one member of the couple dies. Not only that — it also steps up the basis for the surviving spouse’s half of the property (rather than only half, which is what happens with “plain” jointly owned property). This means that the capital gains tax will take a much smaller percentage of the surviving spouse’s wealth when the property is sold.
The limits of community property trusts
There are two states in which CPTs can be formed: Alaska and Tennessee. These trusts have to be funded and have ongoing requirements to achieve their tax benefits. So, they are not a panacea and don’t necessarily fit every married couple’s situation.
How CPTs fit in with other estate planning strategies
If your estate plan is robust and ready for all of life’s potential successes and challenges, it likely includes any number of revocable and irrevocable trusts, powers of attorney, long-term care directives, and miscellaneous probate-avoidance precautions.
Community property trusts can only work for the property you fund into them, meaning that you can and should have other strategies in place such as a revocable trust, will, power of attorney, etc. The same property cannot be managed under multiple trusts at the same time, so it is important for us to figure out which of your assets you’d like to set aside for other types of trusts before settling on the details of your CPT.
Community property trusts are not for everyone. However, if we can determine that setting one up is a realistic fit for you and your family, you can expect to save a large sum by avoiding taxes you would otherwise accrue. Give us a call today to see whether this solution might be an effective addition to your other estate planning strategies.
More from our blog…
Why You Should Designate Beneficiaries
According to WealthCounsel, over a third of Americans have experienced or witnessed familial conflict when someone dies without an estate plan. While most people believe having [...]
Affordable Housing Options for Low-Income Older Adults
Safe housing that meets older adults’ needs is essential to healthy aging in communities. Many seniors with low, fixed incomes struggle to balance housing expenses [...]
Assisted Living vs. Nursing Homes: What’s the Difference?
Assisted living facilities and nursing homes are long-term housing and care options for older adults. Although people sometimes use the terms assisted living and nursing [...]
How the Debt Ceiling Bill Could Impact Medicaid Enrollees
For adults who rely on Medicaid, a bill recently passed by the House may mean holding a job would become necessary to continue accessing benefits. [...]