It’s Time to Revisit Your Trust
Recent changes in federal estate tax exemptions have made it easier for most couples to pass on their joint assets for estate planning purposes, without the complexity of having individual trusts. Since couples usually accumulate assets jointly, meaning each party as the right to use and benefit from the jointly held assets, they can now pass on those assets with the help of a Joint Trust.
A Joint Trust provides for the holding of assets by both spouses and then passing on the assets upon the death of both spouses. Likewise, any couple in a committed relationship who wants their financial affairs to be administered jointly can create a Joint Trust.
The Joint Trust retains the benefits of having an individual trust: no lengthy probate proceedings, a single trust tax return, and no conservator or guardian if one spouse becomes incapacitated or unable to handle his or her affairs. The Joint Trust gives a surviving spouse flexibility over how to use the assets during their lifetime, and allows them to make changes as circumstances warrant to disperse the Trust assets.
Prior to the change in federal estate tax exemptions, an “A/B” (also known as a “Marital/Family”) Trust was typically used to transfer the assets upon death of one spouse to the surviving spouse. However, it required that the couple to split joint assets during their lifetime and use those separate assets to fund their individual trusts. The purpose of this system was to take advantage of estate tax exemptions to minimize or avoid estate taxes on one or both of the spouse’s estates.
However, with the current federal estate tax exemption of $5,340,000 per person, indexed for inflation, this complicated planning is no longer necessary since many couples do not have a combined estate valued at $10,680,000.00, the amount at which more complicated estate tax planning is warranted.
The Joint Trust is a simple estate planning tool that allows a couple to retain the right of joint ownership and control over their property. There are circumstances where additional thought must go into the drafting of a Joint Trust, however, such as in Medicaid planning, the transfer of a family cottage, providing for a special needs child, the need to amend or revoke the Trust when circumstances change, or to add or remove assets from the Trust.
These situations are fact-specific and require the guidance of an experience estate planning attorney to meet your goals of providing for your own care while also leaving a legacy for your children or other people and interests that you value.