Santa Clarita Estate Planning – Living Trusts Compared to Joint Tenancy

 

Clients often ask whether they should create a living trust or put their assets in joint tenancy.  There is no “one-size-fits-all” answer.  This blog post will compare living trusts to joint tenancy.  If you are in the Santa Clarita Valley and are considering an estate planning package that consists of a will or a living trust, contact the Law Office of David Piotrowski today.

Both the living trust and joint tenancy avoids probate.  A trust is more flexible than joint tenancy and easily divides the property among the list of beneficiaries.  Joint tenancy is less flexible, cannot include post-death trusts for tax planning, and works best when two or three people are involved.

The person creating the trust generally retains control and flexibility and has not made a taxable gift to anyone.  The trustor can generally change the terms of the trust and change the beneficiary at any time without the consent of the beneficiary, because the beneficiary has no vested right to the property.

A person who creates a joint tenancy makes a present transfer of property.  This may result in a gift and may be subjected to taxes.  The new owner may possesses the right of partition and can make it difficult to sell/transfer the property.  Therefore, if you decide to create a joint tenancy, it must be with an individual whom you trust.  Furthermore, a joint tenant’s creditors may reach his or her interest in the property.

A letter trust agreement can avoid many of the negatives of joint tenancy and should negate the elements of a present gift, prevent liability for the joint tenant’s actions, and require the surviving joint tenant to distribute the property as designated in the will.

You may also wish to read my blog entry comparing living trusts to wills.

If you are in the Santa Clarita Valley and are considering an estate planning package that consists of a will or a living trust, contact the Law Office of David Piotrowski today.

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