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JOINT REVOCABLE LIVING TRUSTS -
AN ESTATE PLANNING TOOL FOR
MARRIED AND UNMARRIED COUPLES
By Martin H. Cohen,
Esq.
The joint revocable living trust ("JRT") is a special
type of revocable living trust that is created by two people (“grantors”).
They may be you and your spouse, significant other, a brother or sister or
any two people who may have an interest in pooling their assets for estate
planning purposes. (For purposes of this article, I will often refer to the
grantors as a “couple” and often assume that the couple is married. However,
JRT’s work equally well for unmarried persons.)
Lifetime Management. You and your
spouse may also be the initial trustees during your lifetimes. If either of
you becomes unable or unwilling to serve as a trustee, the other can be the
sole trustee. You may provide that you must act jointly in all decisions or
give each other the right to act alone. When both of you are unable to
serve, a successor trustee steps in to manage the trust.
Access to principal and income. As long
as you are both alive, both of you would be entitled to the income and the
use of the principal. You could choose how the trust would be managed when
one of you dies. Here are some examples of your options:
·
Make the trust completely revocable after the death of one
spouse. This allows the survivor full access to all income and principal.
The survivor may choose to terminate for any reason.
·
Give the survivor complete control over half of the trust and
make the other half irrevocable to insure that it will be ultimately
distributed to your children (or other heirs that you have jointly agreed
upon).
·
Make the entire trust irrevocable with all income and limited
principal available to the survivor. This may be of particular interest in a
second marriage. It is not a prenuptial agreement or a postnuptial
agreement, but it may serve that purpose.
After death of both Grantors. When
you have both passed away, the trust is managed and then distributed to your
named beneficiaries in the same manner as with separate trusts.
Reasons for choosing a JRT over separate trusts:
·
A single joint revocable trust may mean a better, more
comprehensive legal document. Traditional estate planning with trusts
means one trust for each spouse. Each document must be prepared, reviewed,
and executed. With a JRT, you create only one trust document. These are
lengthy legal documents, and it may be more economical for your attorney to
provide you with a more comprehensive legal document if you choose a JRT
over separate trusts.
·
No need to split assets. For most couples, the least
attractive aspect of estate planning with trusts is separating joint assets
to fund the separate trusts. I have had more than one case where the
clients have created separate revocable trusts and then failed to fund the
trusts, solely because they were uncomfortable with separating their
assets. (To them, it seemed like a “divorce”.) On the other hand, with a
JRT , there is no need to separate assets before contributing them to the
trust. You may even choose to provide that upon dissolution of the trust,
the assets will be distributed back to the couple jointly.
·
Reduce lifetime administrative expense and inconvenience.
Usually a trust will have its own checking account, savings account and
brokerage account. This means additional bank reconciliations and brokerage
account reconciliations. It may also mean additional fees in connection
with the maintenance of such accounts. The JRT requires only one set of
accounts.
JRT’s have been around for many years. You can easily
see why they are very attractive to couples who wish to do joint estate
planning. However, for tax reasons, most estate planning attorneys avoided
using them where estate tax planning (for married couples) was
required. This has changed for a few reasons:
·
Changes in the estate tax laws make it less likely that your
estate will be subject to estate tax. Therefore, uncertainties in the estate
tax treatment of joint trusts are of less concern.
·
(For married couples only) Even if your estate is subject to
estate tax, recent IRS Private Letter Rulings indicate that we can draft
JRT’s to more easily avoid estate tax results than with separate trusts.
With separate trusts, you have to decide how much property to allocate to
each spouse, and you may have to guess who will die first. With a JRT, this
is unnecessary.
·
IRS Private Letter Rulings indicate that you may be able to
obtain income tax benefits for the surviving grantor that were
previously unobtainable with separate trusts or outright ownership of joint
property.
For most couples, the JRT is an excellent way to
obtain the benefits of estate planning with trusts without some of the
downsides.
To see if a joint trust is
right for you, get an objective opinion from an experienced Elder Law
attorney who can advise you on traditional estate planning issues, as well
as the long term care considerations of creating a revocable living trust.
For a free telephone consultation, you may call me at (954) 315-0355.
If you have questions about anything on this
website, or if you wish to schedule an appointment, contact Mr. Cohen at
(954) 315-0355 or by
E-mail.
Mr. Cohen maintains two offices for the practice of
Estate Planning, Elder Law and Disability Law in Broward County, Florida
for the convenience of his clients. Maps to the offices are available at
the following links.
Lakeside Office Center
600 N. Pine Island Rd.
Suite 450
Plantation (Fort Lauderdale),
FL 33324
and
Flamingo Falls Professional Center
1806 N. Flamingo Rd.
Suite 300
Pembroke Pines, FL 33028
For those of you who are unfamiliar with South Florida geography, Broward
County has 30 municipalities, including:
Coconut Creek,
Cooper City,
Coral Springs,
Dania Beach,
Davie,
Deerfield Beach,
Fort Lauderdale,
(Ft. Lauderdale),
Hallandale Beach,
Hillsboro Beach,
Hollywood,
Lauderhill,
Lauderdale Lakes,
Lauderdale-By-The-Sea, Lazy Lake,
Lighthouse Point,
Margate,
Miramar,
North Lauderdale,
Oakland Park,
Parkland,
Pembroke Park,
Pembroke Pines,
Plantation,
Pompano Beach,
Sea Ranch Lakes,
Southwest Ranches,
Sunrise,
Tamarac,
Weston,
Wilton Manors.
For
information on these cities, click on the appropriate link.
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