A joint trust is a way for spouses to pool their assets into a single trust, often used in estate planning to avoid probate. It can be structured in various ways, including allowing for a co-trustee, and can be revocable or irrevocable. It can also be used to manage taxes and provide ongoing care for disabled children, but may have drawbacks such as blocking access to information for other family members.
A joint trust is a trust used to pool the assets of two spouses into a single trust. It is sometimes used as a component in estate planning to ensure that the surviving partner in the legally recognized relationship retains access to all assets, without the need to go through probate. There are several ways to structure this type of trust, so it is necessary to consider which approach to use to establish a living trust. Additionally, there are some potential pitfalls that should be considered before creating and finalizing this type of financial agreement.
In some cases, the joint trust functions as an alternative to a last will and testament. This approach works well when the intention is to transfer ownership of all assets to the surviving partner once the other partner has died. For couples who do not have children or other heirs they wish to remember, this arrangement carries the benefit of allowing all assets to easily change ownership upon death. A joint trust is considered an excellent option when the probate process within the local area is somewhat complicated, as the surviving spouse can avoid that process entirely.
While a joint living trust is primarily intended to provide the surviving spouse with access to all of the couple’s assets, that does not mean that children cannot be included in this arrangement. For example, the trust may be structured to allow the designation of a co-trustee. Naming an adult child as the trustee creates a situation where if both parents become incapacitated and unable to manage their assets, the trustee can step in and act on her behalf. If both parents die at the same time, such as in an accident, the trustee may also take steps to administer the trust in accordance with any instructions left regarding the disbursement of those assets.
Trusts of this type can be structured as both revocable and irrevocable. With a revocable joint living trust, changes can be made at a later date, under certain circumstances. If the couple divorces, this type of trust could be revoked entirely or reworked to accommodate the change in the relationship. An irrevocable trust is more difficult to change or bypass, although this can sometimes be accomplished, depending on the prevailing circumstances and the local laws that apply to the role of the different types of trusts.
An often cited benefit to a joint trust is the ability to manage the tax burden more effectively. Specifically, this type of trust can reduce or sometimes eliminate the need to pay estate taxes. If the desire is to provide the surviving spouse with control of the assets for the rest of their life, then redirect those assets to support children or grandchildren once both spouses have passed away, the trust can take the form of what is known as a trusty dynasty. In the event there are children who are disabled and unable to care for themselves, the trust could be used to provide ongoing care for that child.
There are some drawbacks associated with a joint living trust. If the combined assets of the spouses exceed a certain amount, the estate may be assessed at a higher tax rate as the assets are disbursed. Trusts of this type also block access to information in ways that last wills and testaments do not. This means that other family members and heirs will not be able to obtain copies of the trust documents and determine if they are entitled to any of the assets included in the estate. While this is often a good thing, it can be problematic if the trustee is also not alive.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
