Many couples take pride, and appropriately so, for the bond they share. They have no secrets; they share responsibilities. They have similar goals, likes, and predispositions. They view the marriage as a special partnership within which everything is shared. When it comes to estate planning, they may see the benefits that can flow from revocable trust arrangements, both in terms of the overall management of assets and the avoidance of at least some of the headaches of probate administration. They’ve always had a joint checking account, so why not a joint trust arrangement? But is a joint trust really a good idea?
What Does the Joint Trust Look Like?
Generally speaking, with a joint trust (particularly a joint revocable trust), the spouses create one trust, into which their assets are contributed during their lifetimes. Typically, the joint trust document provides that all assets contributed are deemed to be owned 50 percent by each spouse, usually as tenants in common. Upon the first death, the assets are segregated into a “Decedent’s Trust,” and a “Survivor’s Trust.” The provisions of each of these segregated trusts are different so as to take advantage of desired estate tax objectives.
The Goal is Convenience – the Result Can Be Confusion
While a joint trust can – particularly for small estates – be convenient, more often than not, any convenience is outweighed by the complexity. Often, the initial goal with the joint trust is to avoid the division of the couple’s assets, with some going to one spouse’s trust and other assets going to the separate trust of the other spouse. In many cases, however, the only thing that is accomplished is the postponing of the required division to a time that coincides with the first death. Many trustees, particularly if they do not have legal or accounting backgrounds, find their duties become truly complicated as they wrestle with the needs – and requirements – of the Decedent’s Trust and the Survivor’s Trust. What assets go where? When, and at what tax consequences, are the transfers made?
Errors in Administration Can Be Expensive
Some survivors and trustees find that errors are easily made in the administration of a joint trust. Remedying those errors can be costly. What seemed at first to be a plan to save time and money ends up more costly than if two separate trusts had been created in the beginning. Most legal experts agree that the administration of separate trusts is more straightforward and much less prone to error.
Estate Planning: Skilled, Experienced Legal Counsel a Key
The law firm of CKB VIENNA has extensive experience in the drafting and creation of trusts of all types. We have helped individuals establish both revocable and irrevocable trusts and have given our insight into all facets of estate planning and wealth management. We are skilled in drafting and coordinating all sorts of estate planning documents, from wills to trusts to buy-sell agreements and succession planning arrangements. While the firm is skilled in all forms of litigation, our attorneys offer guidance designed to avoid the consequence and cost of litigation wherever possible. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.