Benefits of Forming a Trust to Hold Title To Your Assets

Assets Held As Joint Tenants With Your Spouse

Problem: At the first spouse’s death the surviving spouse will receive ONLY a 50% step-up in basis AND joint tenancy fails to take advantage of the decedent’s spouse’s applicable exclusion amount.

Solution: Form a trust and hold the asset as community property titled in both spouses’ names as co-trustee of the trust.

Benefits of the Solution:

• Full step up in basis at the first death, which means lower income tax liability.
• No court proceeding required to retitle the assets at death.
• Can be used to take advantage of the decedent’s applicable exclusion amount.
• Assets Held As Joint Tenants With Someone Else For Convenience

Problem: At the death of the true asset owner, the assets will receive ONLY a 50% step-up in basis, AND the assets of the account are subject to the debts of the convenience owner.

Solution: Form a trust, remove the convenience owner from title and hold the assets as trustee of a trust. The true asset owner can name the convenience owner as a co-trustee with the true asset owner or as a successor trustee.

Benefits of the Solution:

• Full step up in basis at death means lower income tax liability.
• No liabilities for debts of the convenience owner.
• The convenience owner will be able to help the true asset owner in the event of incapacity.

Assets Held As Joint Tenants With Someone Else For Shared Ownership

Problem: Both shares of the assets are subject to the debts of both owners.

Solution: Each owner form a trust, divide the assets into separate new accounts and each owner hold their own assets as trustee of their trust.

Benefits of the Solution:

• No liabilities for debts of “other owners”.

Assets Held As Tenants In Common With Someone Else For Convenience

Problem: At the death of the true owner, the assets will receive ONLY a step-up in basis for the portion of the assets held by the decedent, the assets will have to be retitled through a court supervised probate proceeding, AND a portion of the assets of the account is subject to the debts of the convenience owner.

Solution: Form a trust, remove the convenience owner from title and hold the asset as trustee of a trust. The true asset owner can name the convenience owner as a co-trustee with the true asset owner or as a successor trustee.

Benefits of the Solution:

• Full step up in basis at the first death, which means lower income tax liability.
• No court proceeding required to retitle the assets at death.
• The convenience owner will be able to help the true asset owner in the event of incapacity.

Assets Held As Community Property But Not In A Trust

Problem: At death the assets receive a full step-up in basis BUT the assets will have to be retitled through a court supervised probate proceeding even if left all to the surviving spouse, AND community property fails to take advantage of decedent’s applicable exclusion amount.

Solution: Form a trust and hold the assets as community property titled in both spouses’ names as co-trustee of the trust.

Benefits of the Solution:

• No court proceeding required to retitle the assets at death.
• Can be used to take advantage of the decedent’s applicable exclusion amount.