Should We Have a Joint Revocable Trust?

Trusts are an essential legal tool that can be used to ensure you meet your estate planning goals and have peace of mind that your wishes will be carried out. In addition to distributing your assets to your chosen beneficiaries, they can also maintain your privacy and help your heirs avoid the cumbersome probate process in court. While there are many types of trusts that can be used, married couples might consider setting up a joint revocable trust for the ease and convenience they offer.

What is a Joint Revocable Trust?

A joint trust is one that is set up by spouses who possess joint or individual property. Although each spouse may also set up his/her own separate trusts, a joint trust is often less complicated to establish and maintain. It can also come with less hassle for the surviving spouse.

Since these types of trusts are revocable, they can be changed at any time before the second spouse passes away. Upon the death of the first spouse, the surviving spouse would continue to have control over the trust assets. When the second spouse passes away, the trust becomes irrevocable — meaning it cannot be altered. At that time, the successor trustee would take control of the trust and distribute the assets as instructed in the document.

Additionally, joint revocable trusts can offer critical advantages during the lifetimes of each spouse. Not only can the trust assets be distributed upon the passing of the second spouse, but they can also be used for a spouse’s care in the event he/she becomes incapacitated. If both spouses become incapacitated, the successor trustee appointed in the trust instrument would step in to manage the trust.

What Are the Benefits of a Joint Trust?

Depending on the needs of the spouses, a joint trust can offer several crucial benefits. Usually, joint trusts are a good option for couples in long-term marriages for whom divorce is not a concern. They also work best when there are no existing creditors’ claims against one spouse that could expose the other to liability.

Under the right circumstances, a joint revocable trust offers the following advantages:

• Easier to fund and manage — A joint trust avoids the inconvenience associated with managing two separate trusts and equalizing the value of each, since all the couple’s assets go into one trust.
• Reduce the amount of work during tax season — Joint revocable trusts can be used as an effective and efficient way to minimize estate taxes, rather than set up two separate trusts. It also eliminates the need to file two tax returns which can be an added cost and hassle.
• Avoid unintended tax consequences — A joint revocable trust is not subject to higher tax brackets that may impact a separate trust because it does not become irrevocable until the death of the second spouse.
• Promotes privacy — Trusts do not go through the public probate process or become part of the public record. This can help to ensure a couple’s financial affairs remain private.
• Simplifies the administration process — Since there is only one trust, no transfers are required after the death of the first spouse. This can simplify the administration process, reduce advisors’ fees and other administrative expenses.

Most importantly, a joint trust allows the surviving spouse to have complete control over the assets in a joint trust upon the passing of the first spouse. When separate trusts are in place, the deceased spouse’s trust becomes irrevocable at the time of his/her death — and the surviving spouse typically has limited control over the assets.

How is a Joint Trust Created?

A joint trust is generally created in the same way as any other trust. However, unlike other types of trusts, there are two individuals, typically husband and wife, who serve as co-trustees in this type of arrangement. To set up a joint trust, an instrument must be drafted that specifies the joint trustees, beneficiaries, and how the assets should be distributed. A successor trustee should also be named who will administer the trust upon the passing of the second spouse.

Significantly, once the trust instrument has been created, the trust must be funded. A wide variety of assets can be placed into a trust, including real estate, vehicles, collectibles, artwork, stocks, bonds, and personal property. Other types of assets that can go into a trust can include bank accounts, business interests, and retirement accounts. Notably, if a trust is not funded, it is merely a document that has no effect.

Contact a Skilled Pennsylvania Estate Planning Attorney

If you’re thinking about setting up a joint revocable trust, it’s vital to have a diligent attorney on your side to guide you through the process. The attorneys at Berman & Associates provide compassionate counsel and knowledgeable representation for individuals and their families for a wide variety of trusts and estates matters. Located in Media, Pennsylvania, we serve clients in Delaware, Chester, and Montgomery Counties, as well as in the City of Philadelphia. Contact us today to schedule a consultation.