Trusts can be an essential part of your Estate Planning efforts. Not only can they provide privacy, they can also avoid the inconvenience and hassle of probate for your family. For married couples, a Joint Revocable Trust might be able to offer a sense of confidence that begins the day you both sign.
Read more about Joint Trusts and whether or not they’re a smart choice for your circumstances. Your goals and the financial future you’ll one day leave to your heirs are considerations, and we’ll cover everything below in our Guide to Joint Trusts. Here, you’ll learn:
What is a Joint Trust?
A Joint Trust is simply one Trust that’s set up and funded to cover two married people who have either joint or individual property.
Who should have one?
If you’re married, you might be able to benefit from creating a Joint Trust. A Joint Trust is a single Trust document that covers both spouses and offers provisions for what happens upon the death of each. These specific types of Trusts may be particularly useful for married couples who live in a Community Property state.
The approach to estate planning is potentially beneficial for several reasons. Joint Trusts can:
be easier to create and manage in a Community Property State
avoid the complexities of splitting community property into separate parts that must be held in separate Trusts
help avoid potentially undesirable tax consequences by offering some tax benefits for community property in a Joint Trust (rather than holding property in separate Trusts as something other than community property)
preserve the community property form of ownership, which might be beneficial to a surviving spouse
There are some drawbacks though. For example, a Joint Trust may not offer asset protection in cases of creditors or judgements against either spouse. Because everything is in one Trust, all assets would be vulnerable to judgements. Another possible disadvantage could be a lack of flexibility after one spouse’s death.
In most cases, spouses still have control over individual interests in a Joint Trust. And, your Joint Revocable Trust allows each spouse the option to revoke or amend it as long as you both are still living. Should you choose to revoke your Trust, any assets would simply be returned the same way they were held before they’d been added to the Trust.
Community Property & Trusts
In certain states, “community property” signifies any assets or property you acquire after you’re married. Joint Trusts can be viable options when you live in a state that is declared a “Community Property State.”
When to Revoke a Joint Trust
There are times when you may want to revoke a Joint Trust. This can be necessary in cases of divorce, or when major life changes would make it easier to just start over rather than amending an existing Trust.
Other Common Questions
Treat your decision about a Joint Trust just like you would any other part of your Estate Planning effort. It’s important to fully understand the benefits and potential drawbacks before you decide if using a Joint Trust is the path you want to go down.
Is There an Alternative to a Joint Trust For Married Couples?
There are alternatives to Joint Trusts for married couples. Individual Trusts are one option. This may be a smart choice for cases of second marriages, or when one or both people have large individual estates prior to the marriage. Another case where an individual Trust may be better than a Joint Trust is if one person expects a large inheritance at some point.
What Happens When One Spouse Dies?
When the first spouse passes away, the Joint Trust continues and the spouse still living becomes Trustee and gains control over the Trust. Once the surviving spouse dies, a named Successor Trustee uses the Joint Trust for guidance on settling liabilities and making distributions.
What Are the Main Benefits Of a Joint Trust?
Similar to individual Trusts, Joint Trusts have benefits such as avoiding probate, offering better privacy and providing the ability to manage assets.
Who Should Use a Joint Revocable Living Trust?
Joint Revocable Trusts can be a solid option when a married couple has a generally simple estate and when total assets (combined) don’t meet the estate tax limit threshold, which is $11.58m in 2020. Keep in mind, though, that a Joint Revocable Living Trust, when not set up properly, may result in estate tax issues. This is why it’s so important to have expert advice and planning when utilizing a Joint Trust.
Do I Live In A Community Property State?
As of 2020, there are nine states that are deemed “Community Property States.” They are:
Arizona
California
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
***Alaska is an “opt-in” state, which means married couples have the option to make property Community Property if they wish.
Given the right circumstances, a Joint Revocable Living Trust can be a great solution for your Estate Planning needs. If you’re wondering about whether or not a Joint Trust is right for you, reach out to Trust & Will today. Our team of legal Estate Planning experts can offer you the trusted advice and guidance you’ve been searching for.
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