Many married couples set up a revocable trust to protect their assets upon their death, and ensure they go where the couple desires. Joint trusts have a single trust document that combines all the couple’s assets into one, and manages the estate as a single entity. It’s the easiest kind of trust for a married couple to establish and manage.
What happens, though, when one member of the couple dies? Many couples consider splitting a revocable trust to make some of the funds available to the surviving spouse, while still offering asset protection overall. Let’s examine some reasons why you might consider splitting a revocable trust when your spouse passes away, the things you need to consider before you do so, and why an estate planning attorney is important.
If your current spouse is a second marriage, and there are children from a prior marriage on either side, splitting a revocable trust may be a good thing to consider. It will help to ensure that all the assets you leave behind go to the loved ones you wish to receive them. It’s a good idea to talk with your spouse in advance about any relationship that will be maintained with stepchildren.
Interstate Real Estate
Every state has wildly different laws and regulations regarding estate taxes. This means when you have property in multiple states, you may want to have the trust split to protect your mutual assets from the varying laws in different states.
Complex Financial Disagreements
Among the most common disagreements among married couples are financial issues. If you can’t come to a resolution regarding a complex money issue, it might be a good idea to split the trust, so you can have the final say on the finances that are yours.
The idea of asset ownership can also come into play. Though most marriages assume shared assets, if you have assets that you feel are strictly yours, such as a financial investment from before you were married, splitting the trust can make sure that these assets are handled separately from others.
What Are the Down Sides to Splitting a Trust?
There are potential pitfalls that can come with splitting a trust. Splitting a trust into two shares upon a spouse’s death is likely to increase the cost of managing the trust. It also puts more on the shoulders of the surviving spouse—they have to account to children and other potential beneficiaries.
Taxes aren’t as much of an issue with the current administration, but it can potentially increase taxes in some rare circumstances. It can limit access to the irrevocable part, which can cause emotional trauma to the surviving spouse.
Working with an Estate Planning Attorney
Deciding whether to split a trust upon the death of one spouse can be a stressful and difficult decision to make. As you make these important end of life decisions, working with an experienced Estate Planning Attorney can help you avoid critical mistakes and ensure your assets are protected. If you’re in Cuyahoga County and you’d like more information about revocable trusts, contact Stano Law for help today.