Revocable living trusts are a popular estate planning tool for married couples. They are useful for avoiding probate, planning for incapacity, and providing asset protection.
Depending on the couple’s life situation, an estate plan may include either a joint revocable trust for both spouses or two individual revocable trusts – one for each spouse. Let’s look at a couple of examples:
Example 1 (the elderly couple): Facts – Jack (age 72) and Jill (age 70) have been married for fifty years. They own all their assets jointly. They want to provide for the surviving spouse upon the first to die, and then to provide equally for their three adult children. They worry that Jill, who has not had much experience managing finances, might not know how to handle matters if Jack dies first. Their main goal is to avoid family acrimony after they pass, and to avoid probate.
Solution: A joint revocable trust would be a good fit for Jack and Jill. All their assets are currently held jointly, so titling assets into a joint trust would not be too difficult. Additionally, they have identical dispositive intentions for their joint assets. They could name a trustee to manage the finances of the joint trust if Jack dies first. Having a joint revocable trust for Jack and Jill would also help them achieve their goal of avoiding probate upon the death of the surviving spouse.
Example 2 (the windfall couple): Facts – Jack (age 34) and Jill (age 35) have been married for ten years. They have no children, and no estate plan. They each have similar jobs that pay well. They do not plan on having children. Jack comes from a high net worth family and expects to inherit a substantial amount when his elderly father dies. Jill does not come from family wealth. Jack intends to give his estate to Jill, and then to his cousins and some charitable organizations. Jill wants to provide for her niece when she passes.
Solution: In marriages where only one of the spouses is likely to inherit a substantial amount, and they have differing dispositive intentions, separate trusts may be the best estate planning choice. Using separate trusts allows each to provide for his or her preferred disposition, while still providing for the surviving spouse during his or her lifetime. Separate trusts can also help demarcate which assets are owned by whom within the marriage.
Please remember that the above examples only apply if the trusts discussed in them are properly funded with the appropriate assets. If you have any questions about your current estate plan, or would like to discuss developing an estate plan, please call me at 303-716-9666 or email me at Harvey@hjwlaw.com.