California Estate and Elder Law Helps to Understand Estate Planning Options
· What is a joint revocable living trust?
A joint revocable living trust is a single trust created by a married couple that addresses each spouse’s wishes as to his or her property. Both spouses are the trust makers, and both are almost always the trustees.
· Can spouses create a joint living trust if they own their property in joint tenancy?
Of course. Joint trusts are good estate planning tools for married couples with joint tenancy property. However, allowing property to pass outright to the surviving spouse pursuant to the survivorship feature of joint tenancy may defeat the trust makers’ planning, particularly if federal estate tax planning is implemented. With a joint trust, it is important that, during funding, the spouses “sever” the jointly held property into equal ownership between them to prevent the property from passing outright to the surviving spouse upon the first spouse’s death.
· If my spouse and I choose to have a joint trust, are we able to direct the trustee to hold our separate property within the same trust?
The creation of a joint trust to hold your assets during your lifetime does not preclude either you or your spouse from directing the trustee to hold one or more specific assets for the benefit of either spouse individually.
If individual assets are part of your joint revocable living trust, the trustee must take care to account for the assets and any income derived from them as separate income. This is particularly critical when the trustee is holding separate property for any of the beneficiaries.
Gift tax and asset tax basis issues must be considered when owner-ship transfers occur. Therefore, the trustee must carefully document any change of ownership from one spouse individually to the spouses jointly.
When establishing the assets in the separate name of either spouse, you must consult local law with regard to the requirements for a full transfer of the ownership rights. This transfer is more complicated in a community property state than it is in a common law state. Your attorney can advise you about the requirements for documenting transactions involving specific individual assets.
· If a joint revocable living trust is established with the spouses as cotrustees, may either spouse act independently or is joint action always required?
Generally, either trustee is able to exercise the full powers on behalf of the trust for the benefit of both trust makers. Limitations requiring joint action by the trustees could be written into the revocable living trust, but such limitations make management of the trust cumbersome.
If there is a lack of trust between the spouses, they should consider having a professionally managed trust during their lifetimes or establishing separate trusts. In this way, concerns that a spouse might use the trustee relationship to take advantage of the other spouse are eliminated. A third-party trustee can also play an important role as a financial manager, record keeper, and investment advisor for your trust.
Related posts
