What is a community property trust?
Property ownership is never as simple as who signed the check or who holds the deed. Marital property is especially complex when joint owners become sole owners through the death of a spouse. When ownership changes hands, there are bureaucratic inefficiencies and tax complications that take time and cost money.
Managing the ownership of community property
The Tennessee Community Property Trust Act of 2010 allows partners to create a special trust that defines community property. Community property means that each partner owns an equal share and, in the event of death, the surviving partner seamlessly assumes ownership through the trust.
Managing an estate is always complex. In the community property trust, it doesn’t just define ownership, it circumvents some inheritance and gift costs—most notably reducing or removing capital gains taxes on investments and real estate for the surviving spouse.
There is a legal distinction between marital property and community property. Marital property refers to what is shared between two partners, while community property specifically defines such property as an even 50/50 split. A potential complication to the community model occurs if one spouse has unpaid debt. In this case, the property can be vulnerable to creditors even after the debtor has passed away.
Finding the right estate plan for you
Trusts are complex entities designed to help Tennesseans manage and their assets. The community property trust is one of many estate plan strategies to protect the value of your estate and to provide for your loved ones after you’re gone.
Because everyone’s estate is different, there are many shapes and sizes to choose from: there are basic wills and complex trusts. Every property has unique concerns, which is why a meeting with an estate planning attorney can go a long way toward protecting your loved ones and securing a plan to take care of future generations.