A joint revocable living trust is a powerful tool that married couples can use to simplify passing their assets from one spouse to the other (and eventually to their heirs). However, it is not the correct estate planning solution for every couple. Read on to see if a joint revocable trust is right for you.
Before we delve into the benefits of a joint revocable trust, let’s take a quick tour of a typical estate administration process.
When a person dies, their Last Will and Testament is filed in probate court. (Dying without a will is known as dying intestate, and that’s an entirely different mess.) Probate is the legal process of changing assets and titles into the names of beneficiaries. Depending on the complexity of the estate, probate can be lengthy and costly. Probate is also public, which means that once a will is filed, a person’s assets become part of the public record.
For their assets to remain private and lessen the emotional and financial burden on their beneficiaries, people look for ways to avoid probate. One of the best solutions is to create a revocable living trust. Married couples can create separate trusts or a single trust known as a joint revocable trust.
What is a joint revocable trust?
At its most basic, a joint revocable trust is a living trust created by more than one person.
Both a single revocable living trust and a joint revocable living trust allow people to transfer assets and property while avoiding the probate process. After creating and funding a revocable living trust, the grantors (the people who began the trust) retain the rights to everything in the trust. They may transfer bank accounts, investments, real estate, and other property to and from the trust (except those transactions that occur in the name of the trust). It is also possible to add sub-trusts to satisfy various estate planning needs. Once both grantors pass away, the assets are distributed to beneficiaries according to the terms of the trust.
This type of trust is known as revocable because it can be modified or dissolved while the grantors are alive. An irrevocable trust means that, after creating the trust, the grantor has no control of or access to the assets, and its terms and conditions are fixed and cannot be changed.
What happens to a joint revocable trust when one spouse dies?
When a married couple creates a joint revocable trust, both spouses have access to the possessions held in the trust. When one of the co-grantors passes away or becomes incapacitated, the surviving spouse takes control of the trust.
However, that doesn’t mean the surviving spouse has complete control of the trust. Depending on how the trust was created, a surviving spouse can have total control of the trust, or for blended families or specific tax or asset protection reasons, their authority may be minimized. For example, all trusts and components of a joint revocable trust besides the survivor’s trust can become irrevocable after the first spouse passes away. This locks in the gifting that the first decedent chose and may provide asset protection, too. In this instance, the surviving spouse has total control of the survivor’s trust (which holds their separate property and their half share of the community property). Typically, the surviving spouse also earns income from a credit shelter trust and can access the principal of the credit shelter trust if it is used for health, education, maintenance, and support (HEMS) purposes.
Once both spouses die, all assets held by a joint revocable trust pass to the beneficiaries as designated.
Joint revocable trust for married couple
However, a joint revocable trust agreement is not the correct estate planning solution for every married couple.
A joint revocable trust is recommended for couples who:
- View assets as being equally owned.
- Completely agree with how their assets should be distributed after they both die.
- Have a lasting and committed relationship.
- Are unlikely to divorce.
- Have no children from a prior relationship or marriage.
- Have no creditors’ claims against one partner but not the other.
- Are comfortable with one spouse having control over the assets after the other spouse’s death (as noted, this doesn’t necessarily mean complete control over all assets).
A joint revocable trust is not recommended for couples who:
- Have large estates before marriage—one or both spouses.
- Have children from a prior relationship or marriage.
- Expect a large inheritance they wish to keep separate—one or both spouses (this money can be kept separate in a joint trust, but for large inheritances, two single trusts are preferable).
So, there is no best joint revocable trust for married couples. There is, however, a best married couple for a joint revocable trust.
Joint revocable living trust advantages
Simple to maintain
After establishing a joint revocable living trust, it is easy for a couple to maintain it. With two separate trusts, each spouse must monitor their individual assets and ensure that new property, possessions, and investments are placed in the correct trust. With a single joint revocable trust, there is never a question of where your assets are and where new assets need to go. Also, there is no need to transfer or retitle assets after the first spouse’s death.
No court involvement
From the moment paperwork begins to the distribution of assets, the couple and their beneficiaries never need to worry about involving the courts or the probate process. For large estates (and large families), probate can be complicated, and families often need the help of an attorney. The attorney and other probate fees are often much more expensive than creating a trust to avoid probate.
Joint revocable living trust disadvantages
May expose assets to creditors
Because the couple shares a single trust, if one spouse has debts or creditors, all assets could be vulnerable to collections judgments against one spouse but not the other. (An estate lawyer can make it so creditors cannot access the funds. However, it may result in the surviving spouse losing some control of the trust’s assets.)
Leaving assets to someone other than their spouse
A joint revocable trust is not a good option when a spouse wants to leave some or all assets to an heir other than the surviving spouse. An example is when a spouse has children from another marriage. Joint trusts work best when all assets pass to the surviving spouse.
When does a joint revocable trust become irrevocable?
A joint revocable trust becomes entirely irrevocable after the death of both spouses (as noted, portions of a joint revocable trust can become irrevocable after the death of the first spouse). Once the creators of the trust pass away, the terms of the trust are locked, and all assets are distributed to beneficiaries according to those conditions.
If you are a married couple interested in creating a joint revocable living trust, Harbor Law Firm makes your estate planning process as simple and stress-free as possible.
We will assist you with every step, starting with the joint revocable trust form and finishing with a fully funded trust. Along the way, we’re always available to answer questions like “What is the difference between a living trust vs will?” and all questions you may have.
Our services include the following:
- Knowledgeable guidance customized to your specific circumstances and goals.
- A fully remote process that never requires you to leave home.
- Hours to fit your schedule.
- An adaptable process for exchanging documents and collaborating.
- Flat-rate pricing, so you’ll never be surprised by a legal bill.
We also offer a free consultation and can speak with you outside regular business hours. For more on our remote estate planning process, visit this page. Our proven process defines precisely what you can expect, and our focus is always on your goals. Please contact us today to schedule your free consultation.