Living Trust

Setting Up A Living Trust For Property

In some cases, it is necessary for there to be a separate property trust. Learn here when this might be necessary as well as why.

Setting up a living trust for property is a good idea in many marriages. It is not uncommon for one or both individuals in a marriage to have significant separate property (i.e. property acquired before marriage, property inherited or received as a gift after marriage). In order to avoid complications if a divorce were to occur when separate property exists, it is critical that it retains its character as separate property.

Setting up a living trust for property is a way to place separate property in a joint trust and still retain its character as separate property (you can only do this if it is titled properly within the trust, though). However, since most individuals are lucky to take title correctly when all the assets are owned jointly it is very likely that sometime in the future separate property assets in a joint trust will inadvertently be mingled with the community or jointly held property and end up losing their separate property status.

You can eliminate this possibility by setting up a living trust that is related to each type of property. This means that you will have two living trusts—one for separate property and one for jointly-owned property. In the past the decision to create two trusts instead of one was left entirely up to the attorney based on personal conversation with the client. However, there is specific criteria that may govern the decision to set up a living trust for property: if you have over $60,000 of separate property or own any real estate as separate property then a separate property trust should probably be created.

When setting up a living trust for property, you may end up needing two or three trusts. This may sound expensive, but many estate planning attorneys do not charge extra for this service. Consult with your attorney or other estate planning professional to find out if you should set up a living trust for property, and find out if this will cost you extra.