Estate Law Questions? Ask an Estate Lawyer.
The asset I want to transfer as a "life estate" is my residential house. I don't recall the exact form of the other estate attorney's transfer method--this is why I am asking you, as the expert. The house (and I) are in California.
Hello again: You said:"I will do this via a living trust & will." Those are two of the three methods you can use. The third is by outright gift (via a deed) with life estates retained for both you and your spouse. You have to pick one of the three. The transfer by deed becomes final as soon as the deed is delivered to the grantee(s). The transfer by will becomes effective upon your death and can be changed anytime prior to that. The transfer through a revocable trust can be changed at any time prior to your death, but an irrevocable trust would be difficult to change afterward. As far as taxes go, there is insufficient information here to speculate on that; however, CA has no inheritance tax, and currently, the Federal Estate Tax Exemption is above $5 mil. If you transfer the home by living trust as opposed to willing it to them, there can be huge differences in the capital gains that will have to be paid when your heirs eventually sell the property.
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I've ruled out the outright gift via deed because I want to be able to change any life estate provision (via trust or will) prior to my death.
Regarding a revocable trust, I understand that an "AB" trust (i.e., bypass) permits a "life estate" to be given to my wife, then it goes to my kids on her death. Is that correct? If so, then how does that A/B trust work? Is there software the permits drafting of such a trust in California?
I believe it is a related question since I understand that there is a way that the "AB" trust (i.e., bypass) permits the "life estate" in my house to be given to my wife during her lifetime, then the trust permits the house to go to my surviving children after her death. If this is correct, it is a related question. Is it correct or not?
Yes either a B trust or Qualified Terminable Interest Property (QTIP) trust can hold your home subject to a life estate favoring your wife. Upon her passing it will pass to the remainder beneficiaries who you designate in the trust. You asked "how does an A-B trust work, and that is a very complex subject. Below is a sample A-B Living Trust format. There is a ton of information and forms on line that you can probably adapt to your needs, which sound fairly simple. I can't tell you exactly what the affect of community property has this particular format. You would be well advised to have an estate planning attorney review your plan before you put it into effect.
I hope this information is helpful and that you will enter a positive rating. I thank you for submitting your question to Pearl-Just Answer. We appreciate your business. If you need clarification or additional information, please send me a Reply and I will be happy to explain further. Please consult a local attorney to verify the accuracy of this information according to your state's laws.