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How do you fund a revocable living trust with community property (family residence) and still maintain community property status

Huntington Beach, CA |

If you fund a revocable living trust with family residence that is community property but deed now states title held by trustees how does property still maintain community property status for purposes of stepped up basis

Attorney Answers 5


  1. Your question is a little troubling because it sounds like you did the trust yourself, which is not advisable. Your question highlights one of the reasons. If you used an attorney, you should think about getting a new one.

    Your trust should have wording that states that all property contributed maintains the character of the property contributed. In addition, in California, you have to actually state you are transmuting community property to separate, so the mere transfer to the trust, should not cause a transmutation. Again, if you used an online service, I would not venture to guess what the wording states.

    The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.


  2. Attorney Shultz is correct. It is absolutely vital that you retain an experienced estate planning attorney to review your circumstances, prepare the necessary documentation and assist you in funding the trust. Good luck to you.

    This information is presented as a public service. It should not be construed to be formal legal advice nor considered to be the formation of a lawyer/client relationship. I am licensed in Connecticut and New York and my answers are based upon the law in those jurisdictions. My answer to any specific question would likely be different if I were to review a client's file and have the opportunity to interview the client. Accordingly, I strongly urge you to retain an attorney in your jurisdiction with respect to any legal matter.


  3. I agree with my colleagues. I would point out that trust funding is one of the things that should be done by the estate planning attorney as part of establishing the trust. If you did not use an attorney, and I agree that it sounds like you did not, then you have already made a big mistake, and you should remedy that by having the entire estate plan reviewed to make sure that it is valid and does what you want it to do.

    James Frederick

    ***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ***************************************** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state. I hope you our answer helpful!


  4. I agree wholeheartedly with Mr. Schultz. I would only add that the trust itself has to be drafted to comply with the community property rules. If the rights of the spouses to revoke, amend or manage the trust property are inconsistent with community property ownership, that would cause problems. And, by "problems," I mean "court."


  5. I agree with Mr. Schultz. I would only add one thing. It appears that one of the assets funded to the trust is the family residence. Make sure to consult an attorney about CLAIM FOR REASSESSMENT EXCLUSION. Generally, transfers of property are subject to reassessment by the assessor, which generally results in higher taxes unless the exclusion form is executed. I would recommend consulting an attorney. Best of luck.

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