August 13, 2019
When it comes to your family’s legacy, every dollar you can save from tax collection counts. One way to keep your assets out of the hands of the IRS is the formation of community property trusts.
How does a community property trust (CPT) work?
CPTs save you money on taxes by adjusting or “stepping up” the basis of the entire property after the death of one member of the couple. When you and your spouse invest in property jointly — be it real estate, stocks, or other assets — it becomes what’s called community property if you live within nine applicable states. However, there are two states, Alaska and Tennessee, where community property can be utilized via the creation of a community property trust, even if you do not live in Alaska or Tennessee.
When couples work with their estate planning attorneys to create these trusts, they can take advantage of a double step-up on the property’s basis. The basis of the property is stepped-up to its current value for both members of the couple’s halves. This is different from jointly owned property which only receives the step-up on one-half of the property. That means capital gains taxes are much lower because the taxed amount is reduced thanks to the stepped-up basis. Community property helps couples reduce their income taxes after the death of a spouse.
Getting to know your basic CPT terminology
First, let’s start with a few quick definitions of the financial terms you will need to know to get a sense of whether or not a community property trust is right for you.
One of the best parts of estate planning is that you get out so much more than you put in. In just a short amount of time, we can implement a community property trust that could save your spouse and family tens of thousands of dollars down the road. We are here to help make sure as little of your hard-earned property as possible ends up lost to taxation. Give us a call today, and set yourself up for a better tomorrow.
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