For a married couple, deciding between joint and individual living trust may be confusing. There are factors that should be considered when determining which trust might be best.
These factors include, but aren’t limited to: Whether the trust will be revocable or irrevocable, tax planning, how assets are titled, whether you agree on the same order of distribution, have blended family concerns, etc. For couples, joint revocable trust are the most common because they’re typically less expensive to create, and simpler to manage.
You should be aware that one of the important parts of creating any living trust is understanding the concept of each. A revocable living trust can be modified, amended or dissolved at any time during your lifetime. Irrevocable trusts cannot be easily modified or dissolved without the permission of the trustee and all beneficiaries, and should be used with caution.
Here, we’ll briefly discuss only the revocable living trust.
Unique circumstances and blended families: Individual trust can be a great option for couples who are in their second (or more) marriage. One or both spouses might also have children from prior marriages or relationships, own separate property, or are expecting individual family inheritances that they want to keep separate.
Joint trust is a common tool for couples in their first marriage, or who have similar distribution patterns, and couples who wish to keep assets as a single unit within their marital estate. Note that many couples who are in their second-plus marriages decide to have a joint trust, and add certain marital provisions/restrictions to prevent the surviving spouse from modifying certain aspects of the trust agreement.
Administration during lifetime: Individual trust can make the process of retitling assets into the name of the trust very tedious if the assets are currently jointly titled. Additionally, with individual trust, typically only one spouse will be managing their own trust and therefore, separate trust can require much more work.
Joint trust can be much easier to manage during the lifetime of the spouses, as both spouses will have equal control over the management of the joint assets held in the trust.
Administration upon death: With individual trust, each spouse can designate how they wish for their own assets to be distributed upon death. Because there are two individual trusts, once one spouse passes away, their own trust becomes fully irrevocable. The person designated to administer the trust estate upon death will then need to make distributions to the beneficiaries as outlined in the trust agreement.
More often than not the primary beneficiary is the surviving spouse – and if the couple had a joint trust then certain administrative measures may not have been needed to be performed after the first spouse’s death.
With joint trust, once one spouse dies, the surviving spouse will continue to manage the trust estate assets during their lifetime. Ideally, the spouses agreed to a joint ultimate distribution plan that is to be made of any remaining trust estate assets after the surviving spouse has died. Unless specified otherwise in the trust agreement, there usually is no trust administration that needs to be done after the first spouse dies.
To help decide what type of trust is best for you, consult an estate planning attorney.
Jada L. Gaines is an associate attorney with Elder Law & Estate Planning Center in Bluffton. hiltonheadelderlaw.com
