Revocable living trusts are the most popular estate planning tool for married couples in my law practice. They can be extremely useful for incapacity planning, probate avoidance, asset protection, and privacy. Depending on the married couple’s goals and circumstances, when it comes to revocable trusts an estate plan can include either a joint revocable trust or separate trusts for each spouse. Both options offer advantages and disadvantages. Below are a few client scenarios that explore whether a joint trust or individual trusts are better.
Scenario # 1 – The blended family – a married couple who were both married previously, that both have assets in their own name, and children with other people.
In blended families, especially where each spouse came into the marriage with their own assets, separate trusts may be the best choice. Separate trusts allow each spouse to maintain control of his or her individual assets during their lifetime and ensure their estate passes to his or her intended beneficiaries at death. This can give the children from before the marriage peace of mind, knowing that if their parent dies first, the surviving spouse can not change the terms of the trust and subsequently cut out the children.
Scenario # 2 – The “high-risk” couple – A couple where one or both have a job that is considered high-risk (think medical or law practice) with an estate over 4 million dollars. They are concerned with creditor protection and losing their marital estate should either of them be the target of a lawsuit. They also want to minimize their risk for being subject to the estate tax.
Separate trusts are usually the better option when creditor protection is a potential issue for either spouse. The other spouse’s trust’s assets should stay out of reach from his or her spouse’s creditors and marital assets should be separated to minimize the estate tax risk.
Scenario # 3 – The “senior” couple – A couple who have been married for many years and want to avoid probate.
A joint revocable trust will most likely be the best option as long as the couple’s assets are jointly owned, goals are aligned, and beneficiaries are identical. Joint trusts are sometimes easier to “fund,” easier to administer, and easier for the beneficiaries to receive.
These are the most common scenarios that I see in my office. In every estate plan, there are pros and cons for each decision that needs to be made. You don’t have to make these decisions alone. Come in for a free no-pressure consultation to get an idea of what is best for you and your family’s goals.