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Author: CCSand Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121316  
Subject: Re: Stocks in name of Trust or Joint? Date: 9/24/1999 7:08 PM
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Bobbcat wrote:

If you both die in the same car accident, the Jointly titled asset would have to go through probate. One of the purposes of the Trust is to avoid probate.

Not necessarily. If the assets are titled "joint tenants with right of survivorship," in most states those assets will pass outside of probate by "operation of law." The law is so in CA.

However, this form of ownership can have negative consequences re: asset protection. JTROS assets are often more easily attached by creditors of one of the joint owners. (This is because of some ancient and ridiculously complicated legal theories about the nature of title...)

In addition, assets that are held JTROS do not receive a full step up in cost basis to FMV at the time of death of the deceased. They only get a half-step up in basis. Assets that are held as community property (which can be inside of an RLT) get a full step up in basis to FMV as of the date of death. So if the heirs sell the assets shortly after death, there will be minimal capital gains taxes and they will get the assets free and clear.

The step up in basis and asset protection, as well as avoiding the costs of probate court which you mentioned, are really good reasons to hold property as CP (if you live in a CP state) within an RLT.

Additionally, if the RLT contains a bypass trust, you can also achieve estate tax sheltering to the (current) maximum of $1,300,000. If assets are held jointly and outside of the RLT, it is probable that only $650K worth of assets will be sheltered from estate tax.

If the original poster is married, this is perhaps the best reason to keep his assets in his RLT.

My apologies in advance for being a bit long-winded...

Fool on!
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