The question of whether you can fund a bypass trust—also known as a credit shelter trust or an A-B trust—with jointly owned property is a common one in estate planning, and the answer is generally yes, but it requires careful consideration and specific legal maneuvering. Bypass trusts are designed to take advantage of the federal estate tax exemption, allowing assets to pass to beneficiaries without incurring estate taxes. As of 2024, the federal estate tax exemption is $13.61 million per individual, meaning estates below this value aren’t subject to estate tax. However, planning with a bypass trust, even for estates below this threshold, can still be beneficial for state estate taxes or for long-term asset protection.
What happens to jointly owned property after death?
Jointly owned property—like a house or bank account held with “right of survivorship”—automatically passes to the surviving owner upon the death of one owner, bypassing probate and, importantly, bypassing the estate tax benefits a bypass trust offers. This is because the deceased owner’s interest isn’t considered part of their estate for tax purposes. To effectively fund a bypass trust with jointly owned property, you can’t simply leave it as-is. Typically, this involves retitling the property *before* death, transferring ownership to a trust created for this purpose. This process is more complex than simply naming beneficiaries, and requires careful documentation to ensure it’s legally sound. Approximately 70% of Americans do not have up-to-date estate plans, which can lead to unintentional consequences when dealing with jointly owned assets.
How can I retitle property into a bypass trust?
Retitling property to a bypass trust usually involves a deed transfer or an assignment of ownership interest. For real estate, this requires preparing and recording a new deed that names the trust as the owner. For financial accounts, you’d change the registration to reflect ownership by the trust. This isn’t a simple task; it’s crucial to work with an estate planning attorney, like Steve Bliss, to ensure all paperwork is correctly prepared and filed, and to avoid unintended tax consequences. For example, gifting property to a trust during your lifetime could trigger gift tax implications if the value exceeds the annual gift tax exclusion ($18,000 per recipient in 2024). Steve often reminds clients that proactive planning can save families significant expense and heartache down the road.
I heard a story about a family who lost money due to improper titling—what happened?
Old Man Tiberius, a retired fisherman, and his daughter, Clara, jointly owned a small beach cottage. Tiberius, believing joint ownership was enough, never created a trust or updated his estate plan. When he passed away, the cottage automatically went to Clara. However, unbeknownst to them, Tiberius also had a significant amount of other assets that, when combined with the cottage’s value, exceeded the estate tax exemption at the time. The entire estate, including the cottage Clara thought she’d inherit tax-free, became subject to estate taxes. A significant portion of the family’s wealth was lost to taxes, a situation that could have been avoided with a properly funded bypass trust. Clara lamented that if her father had listened to his friend, an estate planning attorney, this outcome could have been avoided.
How did a similar family *avoid* this issue with proper planning?
The Miller family, facing a similar situation, consulted with Steve Bliss. They jointly owned a rental property, but were concerned about estate taxes. Steve advised them to create a bypass trust and retitle the property into the trust’s name. This was done several years before the father, George, passed away. When George died, the rental property was already owned by the trust, effectively shielding it from estate taxes. The trust then distributed the rental income to George’s wife for her lifetime, with the remainder eventually passing to their children. This ensured the family wealth remained intact, and provided ongoing financial support for the surviving spouse. This story is a testament to the power of proactive estate planning and careful asset titling. A well-structured bypass trust can provide peace of mind, knowing your assets will be protected and distributed according to your wishes, and potentially save your heirs a significant amount of money.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar 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 Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
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:
- living trust
- revocable living trust
- estate planning attorney near me
- family trust
- wills and trusts
- wills
- estate planning
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “What estate planning steps should I take if I own a small business?” Or “How long does probate usually take?” or “How does a trust distribute assets to beneficiaries? and even: “How do I rebuild my credit after bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.