Yes, you can transfer your home into a bypass trust, also known as an AB trust or a credit shelter trust, during your lifetime, though it’s a decision with significant implications requiring careful consideration and legal guidance from an estate planning attorney like Steve Bliss in Escondido. This type of trust is designed to take advantage of both spouses’ federal estate tax exemptions, sheltering assets from estate taxes upon the death of the first spouse. It involves dividing a trust into two components: a survivor trust and a bypass trust; the bypass trust holds assets that are exempt from estate tax and passes directly to the beneficiaries, while the survivor trust holds assets that may be subject to estate tax. Successfully implementing this strategy requires proper funding and meticulous record-keeping to avoid unintended consequences. The goal is to minimize estate taxes and ensure a smooth transfer of assets to your heirs, but the complexity necessitates expert advice.
What are the tax benefits of a bypass trust?
The primary tax benefit of a bypass trust lies in maximizing the use of federal estate tax exemptions. In 2024, the federal estate tax exemption is $13.61 million per individual, meaning that estates below this value aren’t subject to federal estate tax. However, estate tax laws are subject to change, and exceeding this limit can result in substantial taxes – rates currently reach up to 40%. A bypass trust allows you to shelter a significant portion of your assets, even if your total estate exceeds the exemption amount. For example, if a couple’s combined estate is $15 million, a properly funded bypass trust could potentially shield over $7 million from estate taxes. Remember though, this is contingent on proper execution and adherence to current tax laws.
How does transferring property affect my property taxes?
Transferring your home into a bypass trust *can* have property tax implications, particularly under Proposition 13 in California. While a simple transfer between spouses generally doesn’t trigger a reassessment, transferring ownership to a trust *may* be considered a change in ownership, potentially leading to a reassessment of your property taxes to its current market value. Thankfully, there are exceptions! Transfers to certain irrevocable trusts, like a bypass trust established for legitimate estate planning purposes, may qualify for the parent-child or interspousal transfer exclusion, avoiding a reassessment. It’s vital to work with Steve Bliss to ensure the transfer is structured correctly to take advantage of these exclusions. A failure to do so could result in a significantly higher property tax bill each year.
What happens if I don’t properly fund the trust?
I once worked with a lovely couple, the Millers, who had meticulously drafted a bypass trust years prior, but never formally transferred the title of their home into the trust. They assumed the trust document itself was enough. Sadly, when the husband passed away, his estate was subjected to substantial estate taxes because the home wasn’t legally owned by the trust. It was a heartbreaking situation – they had gone through the expense and effort of creating the trust, only to lose its benefits due to a simple oversight. Proper ‘funding’ means formally transferring legal ownership of assets—like real estate, bank accounts, and investments—into the name of the trust. Approximately 60% of estate plans fail to achieve their intended goals because of inadequate funding, according to a recent study by the American Academy of Estate Planning Attorneys.
Can a trust be revised if my circumstances change?
Luckily, there’s often a path to correct such issues, and I’ve seen it happen many times. The Hansons had established a bypass trust several years ago, but their financial situation dramatically improved. They hadn’t reviewed or updated their estate plan, and the trust wasn’t adequately maximizing their available exemption. After a thorough review, we were able to amend the trust to take full advantage of the increased exemption amount and restructure the asset allocation. They were relieved to know their estate plan was aligned with their current circumstances. Most revocable living trusts, including bypass trusts, allow for amendments, providing flexibility as your life and financial situation evolve. However, it’s crucial to consult with an attorney like Steve Bliss to ensure any amendments are legally sound and don’t inadvertently create unintended tax consequences. Regularly reviewing and updating your estate plan, at least every three to five years, is the best way to ensure it continues to meet your needs.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What is estate planning and why should I care?” Or “How do debts and taxes get paid during probate?” or “How do I set up a living trust? and even: “What happens to lawsuits or judgments against me in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.