A Community Property Trust is not as common as other revocable trust agreements used in estate planning. However, this type of trust agreement can provide benefits for spouses that other trusts do not provide. Our South Carolina community property trust lawyers assist clients in exploring the benefits and downsides of a Community Property Trust. In many cases, the advantages outweigh the downsides for many couples.
Downsides of a Community Property Trust
Even though there are several advantages of using a Community Property Trust, there are several downsides that you should consider before proceeding with this type of estate planning tool.
Cost to Create a Community Property Trust
The cost to create a Community Property Trust can be higher compared to other trust agreements. In addition to the cost of funding a trust, you must include several provisions in the trust that make the trust longer and more complex to draft. You must provide for several different scenarios, including you and your spouse are alive and healthy; you and your spouse are disabled; either spouse dies; and, both you and your spouse are deceased.
Even though the cost of creating a Community Property Trust may be slightly higher than other trust agreements, the advantages can greatly outweigh the costs. Benefits include:
Maintaining all assets titled jointly
Simplify estate tax planning
Income tax advantages for a surviving spouse
Avoid probate
Consolidation of assets and property for simplified management
Reduces capital gains taxes
Funding Can Be Difficult
Funding the trust can also be expensive and time-consuming. As with any trust, you only receive the benefits of the trust if the property is held by the trust. Therefore, you must work closely with your South Carolina community property trust lawyer to ensure all property is titled in the name of the trust or is designed to be payable to the trust upon death. We have a great deal of experience helping clients transfer assets to a trust in an efficient and cost-effective manner.
Real Estate Protection Concerns
In some cases, real estate held in a Community Property Trust while both spouses are living may not have as much protection from creditors and lawsuits as the real estate would if it was titled another way. Assets of a deceased spouse held in trust for the surviving spouse or children are protected. Working with an experienced attorney ensures you choose the option for titling real estate that provides the highest level of protection from creditors.
Gift Taxes Could Be An Issue
If the Community Property Trust agreement is not drafted correctly, you could incur gift taxes when you fund the trust. Our South Carolina community property trust lawyer understands how to draft a trust agreement that avoids gift taxes when you fund the trust.
You Must Have a Trustee in Tennessee
You can only create a Community Property Trust in Alaska and Tennessee. Therefore, to take advantage of the benefits of a Community Property Trust, your South Carolina community property trust lawyer must “borrow” Tennessee’s laws regarding trust agreements. For the trust agreement to be enforceable, at least one trustee must be a Tennessee resident. However, our lawyers can help you arrange for a trustee in Tennessee to overcome this minor obstacle.
Contact a South Carolina Community Property Trust Lawyer
If you want to discuss creating a joint trust, schedule a consultation with one of our South Carolina wills & trusts lawyer for more information. We have the expertise you want on your side in estate-planning matters.