You can take advantage of the overlap between California real property law and estate law to benefit your estate plan by retitling real estate, forming living trusts, and other measures. The following represents only a few of the many ways that you can structure real estate ownership to benefit your estate plan.
Living Trusts
Perhaps the most important advantage of forming a living trust is that its assets do not go through probate after you die. This means that if you structure your living trust properly, your real estate can pass directly to your beneficiaries with no intervening red tape or delay. You will need:
● a trust document;
● an appointed trustee other than yourself or a successor trustee to take over automatically when you die;
● named beneficiaries; and
● assets to place into the trust.
Re-Titling Real Property
There are four main ways of re-titling property to enhance your estate plan, and some of these are better than others for certain purposes. Unless you want to abandon control over the real estate during your lifetime by creating an irrevocable trust, however, your creditors will still be able to reach it.
Title held by a living trust
To exempt trust property from the delay and expense of probate proceedings, title to the trust property can be held in the name of the trust, not the name of the individual who donated the asset to the trust.
Holding title as an individual
The main disadvantage of holding title as an individual is that your personal creditors can use your property to satisfy your debt, even to the extent of selling it and pocketing the proceeds. The California homestead provides significant protection if the property is your family home, however.
Joint Ownership (ownership by two or more parties at the same time)
Joint ownership between spouses offers very little utility in California, since California is a community property state that, in effect, assumes joint spousal ownership of all marital property. Joint ownership of real estate might make sense for, say, a general partnership, as long as the partnership agreement was written with clarity and skill.
Title held by an LLC
Re-titling real estate in the name of an LLC that was designed for this purpose is generally preferable to titling it in the name of joint owners. The LLC is a limited liability entity like a corporation, which means that it offers significant protection from creditors. It also allows the property to be transferred to beneficiaries without probate, as long as the beneficiaries are members of the LLC. LLCs also offer significant tax advantages.
There’s No Time Like the Present
Estate planning and real estate are two complex bodies of law that don’t fit neatly together. If you own real estate and you seek to maximize the value of your estate plan, you are going to need to take that into account. Contact CKB Vienna today so that we can discuss your situation with you. We can be reached by telephone, or you can simply contact us online. We maintain offices in Rancho Cucamonga, Riverside, and Los Angeles.