The Case for the Joint Living Trust

In recent years, the revocable living trust has become the choice of record for estate planning.  A trust is a contract between the maker of the trust, normally called the Grantor, and the manager of the trust, typically called the Trustee.  The trust is a set of instructions whereby the Grantor enters into an agreement with the Trustee to manage certain assets r-titled in the name of the Trustee.  For example, a Grantor may have a large investment account.  He would create a trust making himself the Trustee and he would re-title the account in his name as Trustee.  While he is living, he uses his own Social Security number for tax purposes and continues to manage the assets as he has done in the past.  The difference is when he dies, the assets belong to the trust, and the trustee that he named to take over, then manages the assets, and carries out the instructions.  Those instructions may be to distribute the assets to his children, or to continue them in trust for his spouse, or to continue in trust for the benefit of children and for spouse.  In recent years, attorneys have been turning toward the joint revocable living trust for married couples.  The reasons for this are several.

First, it is extremely easy for a couple who hold assets in trust to change the name on the assets to themselves as trustees and continue to manage them as a joint account.  Similarly, it is also very easy to change within the joint trust, the ownership of an account from husband to wife, or wife to husband, without having to actually change the names on the account or asset since the account is already in their joint names as trustees.  This might be advisable if the husband were terminally ill and the wife decided to put all of the assets into his share of the trust so that at his death.  These assets (i.e. stock, bond, real estate investments, etc) would be included in his estate for tax purposes, and the tax basis (cost basis) for those assets would be stepped up, or increased, to date of death value.  So this way there would be no capital gain tax on those assets if the surviving spouse, as Trustee, then wanted to sell those assets to change the investment strategy to more benefit the survivor.  Another reason we may want to have the ability to shift assets between from husband to wife and vice versa, if one of the couple is suffering from a disabling disease, illness, or injury and would in the future require long-term care in a nursing home.  We may want to put the assets in the healthy spouse’s share of the trust so that if the healthy spouse later died, we can consider strategies, which would protect those assets from being counted against the sick spouse should they later require public assistance to address their long-term care expenses.

In the past the tradition has been for attorneys to create separate trusts for husband and wife, today many professionals and their clients see the advantages of combining trusts into a single joint revocable trust where husband and wife hold the assets separately within the trust but manage them jointly.  In some cases, clients actually have asked us to combine separate trusts into a restated and a revised joint trust to gain the benefits outlined in this article. 

If you need more information about joint trusts, please give me a call.

For more information call Joseph T. “Chip” Buxton III, a member of the law firm of Buxton and Buxton, A Professional Corporation .and the Founder of TrustBuilders Law Group with offices in Urbanna, Yorktown and Williamsburg VA.