Community Property Trust
A Community Property Trust is a special type of Joint Revocable Trust designed for couples who own low-basis assets, enabling them to take advantage of a double step-up by utilizing the laws of South Dakota, Tennessee, or Alaska. These three states allow individuals, even non-residents of their state, to opt into their community property laws via a Community Property Trust.
Ensure The Investments You’ve Made Stay With The Family
Although there are other benefits to owning assets as community property, the primary reason we care about community property from a planning perspective is that it impacts the basis in assets of the married couple for tax purposes. Generally, most assets of a deceased person receive a new basis equal to the fair market value of the assets at the time of the decedent’s death. With community property, at the death of the first spouse, the new basis applies not only to the decedent spouse’s half of the community property, but also to the surviving spouse’s half of the community property. It is difficult to overstate the potential benefit of the adjusted basis for both the decedent’s half interest & the surviving spouse’s half interest in their community property.
Plan For Financial Security
However, states like Indiana & Illinois are not community property states & there is currently only a 50% increase in a jointly owned assets income tax basis on the death of one spouse; only one-half of the value of the jointly owned asset is included in the deceased spouse’s taxable estate.
Still, a Community Property Trust may not be for every married couple. Each estate planning strategy must be carefully evaluated before it is implemented to avoid any negative consequences. Under the right circumstances, this is a strategy that can be incredibly advantageous.
At Politakis Law, we provide our clients with comprehensive estate planning support that’s personalized to suit their specific needs. We know that preparing for the future can be difficult and overwhelming, but when you turn to us, you can rest assured that we will offer professional, knowledgeable guidance to help you reach your goals. Ready to get started? Schedule your virtual or in-person consultation with Politakis Law today for estate planning & elder law assistance in Schererville.