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If you live in a community property state and you are not leaving one recent to family, why would you need a trust?

AM
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Damed iPad.., deciding what I mean for me....

Should say "one red cent"

AM
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I'm using a revocable living trust to avoid having my assets pass through probate court. One less hassle for the heirs.

intercst
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I'm using a revocable living trust to avoid having my assets pass through probate court. One less hassle for the heirs.

intercst

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OK - here's our exact situation: We are married and living in California (a community property state). If one of us dies, of course we want the other one to get everything we have. But we have always kept our finances separate. Vanguard has all of our intangible assets, but in separate, individual accounts with each other as beneficiary.

Since we are in a community property state, and the surviving one of us would get everything anyway, is there any need to have a trust?

AM
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AngelMay asks,

Since we are in a community property state, and the surviving one of us would get everything anyway, is there any need to have a trust?

In that specific case, probably not. But what if you both die in a plane crash or some other event? What happens then?

My understanding is that California has particularly orneorous probate court fees, so even people with realatively modest assets are well advised to arrange their affairs so as to avoid them. You can probably do that by making sure everything is properly titled and accounts have the proper beneficiaries, but make sure you understand California law on the point.

intercst
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Thanks, intercst.
Much appreciated.
The RV is in my name only - we will change that when we get CA title for it. Otherwise, everything else is jointly owned except our bank accounts and investment accounts - but those already specify each other as beneficiary.

Would that have to go through probate?
Does it have to go through probate for the husband or wife to get what the other had? It's all very confusing...

AM
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AngelMay asks,

Would that have to go through probate?
Does it have to go through probate for the husband or wife to get what the other had? It's all very confusing...

</snip>


Probably nothing as long as everything is properly titled.

Note that I'm single, so I can't hold property jointly. The only way I can pass real estate to an heir without probate is through a trust.

intercst
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Probably nothing as long as everything is properly titled.

Note that I'm single, so I can't hold property jointly. The only way I can pass real estate to an heir without probate is through a trust.

intercst

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Thanks so much.
As I get older and older this stuff gets more and more overwhelming. :)

AM
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Note that I'm single, so I can't hold property jointly. The only way I can pass real estate to an heir without probate is through a trust.

That is not true. You do not have to be married to hold property jointly. You can put anyone else on the title to your property that you want, but it is not without ramifications including that you just made a gift to that person, that property is now part of that person's assets and could be taken in a lawsuit, etc., but there is no reason you can't hold property jointly, and that can be either with rights of survivorship where the property passes to the other owner(s) upon your death or as tenants in common where each owner can sell their ownership interest separately and would leave it to whoever they want in their own will.

I hold some property with DH as JTWROS, but I have also owned a house with my brother as Tenants in Common.

I will reiterate that I think it is best to seek the advice of an estate planning attorney when doing estate planning, and not do this as DIY. There are just too many pitfalls. And yes, I could keep you entertained for hours with some pitfalls that I have seen that you would just not believe.
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2gifts writes,

Note that I'm single, so I can't hold property jointly. The only way I can pass real estate to an heir without probate is through a trust.

That is not true. You do not have to be married to hold property jointly. You can put anyone else on the title to your property that you want, but it is not without ramifications including that you just made a gift to that person, that property is now part of that person's assets and could be taken in a lawsuit, etc.,

</snip>


Exactly! That's why the property is in a trust.

I guess you could say I was imprecise in my language. Instead of writing "I'm single, so I can't hold property jointly", I should have written, "I'm single, it would be foolish to hold the property jointly."

intercst
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Generally, you'll want assets to pass from your estate to your designated heirs (spouse, family, friend, charity) without have to first go through probate, where the will or the state probate laws will determine where the asset will go and for which a 1% to 5% fee (depending on the state) will be charged to the estate. The probate process can also be lengthy.

Property that is titled can do this through joint ownership, although if the joint owner is not a spouse, there may be other issues to deal with such as the % owned by the joint owner not getting a step up in basis, gifting issues and so forth.

Property that has named beneficiaries, such as IRAs, annuities, life insurance and retirement plans, will avoid probate. It is critically important that these beneficiaries, and contingent beneficiaries (if applicable) be kept current....otherwise the owner risks having the property deemed to be intestate (no owner on death) and be added to the probate estate.

Other property that is not titled to the heir or that does not designate beneficiaries, can avoid probate by being held in trust. A totten trust (transfer on death) is the easiest way to transfer taxable account balances and the simple revocable trust is a relatively easy way to transfer most everything else. But these offer the trustee no tax or estate valuation benefit, which would require more complex trusts...and there are many types.

In the far western (except OR) community property states, all community property will step up basis at the death of the owner and pass to the surviving spouse...with few exceptions. I do not believe any of the CP states require any community property to be added to the probate estate.

If this is a concern, I'd suggest speaking first with a CPA or CFP who manages estates and charges an hourly fee. This person should be able to assess your situation and make recommendations on what, if any, strategies or instrument (such as trusts) alternatives that would best meet your needs. If a trust (or trusts) are the best alternative, that person will refer you to an estate attorney to draft the trust.

BruceM
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