If you’ve got property in your name and are thinking about passing it on to your spouse, kids, or even your grandkids, it’s time to start thinking about estate planning. If the thought of estate planning makes you a little nervous, that’s okay. While the government hasn’t made inheriting property easy, there are things you can do now to make sure you’re giving a blessing instead of a curse.
What is a community property trust?
A community property trust is a legal trust intended to protect the assets of married couples upon their death. These trusts ensure that any asset or property protected by the trust will appreciate in value after the death of one or both spouses.
One thing you can do to ensure that you’re leaving a solid legacy is to put your estate in a property trust. If you already live in one of our nation’s nine community property states like Arizona, California, Wisconsin, Idaho, Louisiana, Nevada, New Mexico, Texas, or Washington, you and your spouse have joint ownership of your property (and your debt). But if you live outside one of these nine states, you have to put your property in a community property trust in order to have the same kind of benefits.
For those that live in any of the nine community property states, estate planning comes a little easier. But for those who live outside of those states, lessening the burden of the government’s tax on your estate isn’t as easy. Not only do your loved ones have to worry about capital gains and estate taxes, but they don’t get to enjoy the full legacy you set aside for them. A community property trust ensures that the burden for your loved ones is minimal.
How does a Tennessee Community Property Trust work?
A Tennessee Community Property Trust ensures that your loved ones won’t have to carry the burden of having to pay major capital gains and estate taxes. While Tennessee isn’t a community property state, this community property act (signed into law in 2010) gives married couples the opportunity to protect their assets from capital gains and major estate taxes when they pass away.
Let’s say you and your spouse purchased 100 acres of land in Leiper’s Fork valued at $1 million ten years ago. You both decided to work with your financial advisor to put it into a Tennessee Community Property Trust to lessen the burden of capital gains upon your passing. When you or your spouse passes, you can sell the property at the current market value with no capital gains (or very minimal). Now you, your spouse, (or the surviving beneficiary) can use the profits to live.
If you’re not a Tennessee resident, you can still set up a Tennessee Community Property Trust. That’s right, there are ways to enjoy the benefits of a community property trust without having to live in the state. You just need to appoint a qualified Tennessee resident as trustee or a local bank or institution as fiduciary.
How do I set up a Tennessee Community Property Trust?
Ready to set up your Tennessee Community Property Trust? We can help! Contact a SageSpring financial advisor to get started. We can work together to determine if this type of community property trust is right for you and your family.
The opinions expressed here are those of the author and not necessarily Raymond James. Opinions are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James, we do not provide advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
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