Will There Be Property Tax Consequences With A Living Trust?

A common question I get is whether or not creating a living trust means you will have property tax consequences or changes. I often suggest my clients get a living trust, especially if they own property in the state of California. But, a major drawback seems to be the possibility of causing a property tax reassessment if anyone touches the title to the property. No one wants the added stress of a reassessment, but please note that there are exemptions for this. You simply have to look for them. 

Why Choose a Trust in the First Place? 

Most people tend to believe that creating a will is enough estate planning for their future. However, there are many options out there, and some of these options may fit your family’s needs much better than a will. A will takes you to Court after death. A trust takes you out of Court after death. See the difference? 

If you have property that you want to leave to your family, consider a revocable living trust. You can put the property into this trust and there will be no change in property taxes because there technically is no change in ownership until your death. Now, the only caveat is if you own property in joint tenancy with someone other than your spouse. That could be problematic and this is where you need to have the advice of counsel to make sure it is done the proper way, or you will risk a reassessment for joint tenancy property.

When a revocable trust becomes irrevocable upon your death, that’s the time you could see changes. However, there are even exceptions to this situation, like the “parent-child exception”. In other words, you can avoid a reassessment if you are passing the property directly to your child, even though the property changes owners. 

The parent-child exception does not exempt ALL property from reassessment. Be sure to check with a trusted attorney to make sure you’re taking advantage of every exception that applies to your situation. 

If you get a revocable living trust, nothing really changes, especially in terms of taxes. The only thing that’s changed is the title to your assets, and the law affords you protections for doing that. So, do it without worry. This is an excellent way to transfer your property without triggering a reassessment that could cause you more stress, which is what we want to avoid. You have already worked hard to get this far in life, so let us help you choose a path to asset protection that offers both security and peace of mind. 

Your next step is to join our facebook group called “Parents Protecting Assets in California”. We provide valuable information on protecting assets from future in-laws and creditors!