Joint Revocable Living Trusts

While individual living trusts work well for one person's property, a joint living trust can be a useful tool when two or more people own property together.

With a joint trust, the grantors transfer jointly-owned property into the trust, and each grantor separately names beneficiaries for their share of that property. So each person can have different wishes for their portion of the shared property within the same trust. In their joint trust, grantors can also include and name beneficiaries for their individually owned property.

What is a Joint Trust?

A joint living trust is a revocable trust that two or more people (called the grantors) make together. A joint trust allows people who co-own property to put that property into just one trust, rather than making individual separate trusts for the same property.

With a joint trust, the grantors transfer jointly-owned property into the trust, and each grantor separately names beneficiaries for their share of that property. So each person can have different wishes for their portion of the shared property within the same trust. In their joint trust, grantors can also include and name beneficiaries for their individually owned property.

Who Should Make a Joint Trust?

Joint trusts often make sense for married couples or long-term partners because they likely own property together, have intertwined financial lives, and share long-term estate planning goals (like leaving the majority of their estate to their children). In contrast, making individual trusts requires couples to divide up their property precisely so that each can transfer their portion into their own trust. This would be arduous for some couples, and for others, it would be impossible.

That said, not all couples need a joint trust. Individual trusts might be a better choice for those who have kept their finances and property mostly separate. Also, those in second or subsequent marriages might want a more nuanced plan, especially if they hope to provide for their spouse while protecting an inheritance for children from a prior marriage.

A joint living trust can also work well for non-coupled people. For example, adult siblings might keep their family's vacation home in a joint trust after their parents die.

How a Joint Living Trust Works

A basic joint trust is perfectly sufficient for many couples. Here is an overview of how they work.

The Trust Document

Like all trusts, a joint living trust made by a couple must be in writing, name a trustee, and provide instructions for managing and distributing property. The couple must sign the document, have it notarized, and transfer their jointly owned property into the trust.. Most estate planning attorneys can easily make one for you, or you can do it yourself with a good DIY estate planning product.

Terms of the Trust

The terms of a joint trust can be highly personalized to the couple's circumstances. Usually, however, they name themselves as the co-trustees of the trust and agree that after one spouse dies, the other will serve alone as the remaining trustee. Each spouse also names a successor trustee, who will serve only when that spouse dies after the first spouse. Each spouse names beneficiaries for their separate property and for any joint property they will have if the other spouse dies first.

Trust Property

Spouses transfer into the trust the property they own together, property they own individually, or both. As with all living trusts, some types of property should not be transferred into a joint living trust. For example, you don't need to add a co-owned property that will pass directly to the surviving spouse when the other spouse dies—like property owned in joint tenancy or tenancy by the entirety. And of course, if you are legally married or in a registered domestic partnership, you need a solid understanding of how your state's marital property rules affect what you own. (See Chapter 4 for details about choosing what property to add to your living trust.)

Control of Trust Property

In a typical joint living trust, each spouse is a trustee and has control over the trust property while both are alive. Either spouse can act on behalf of the trust—sell or give away trust property, for example.

Amendments or Revocation

In most joint living trusts, either spouse can revoke the trust or add a separately owned property at any time. However, both spouses must consent to amend or change any terms of the trust document—for example, who gets what property or who will be a successor trustee.

The ability to amend or revoke means that either spouse can, by revoking the trust, return the situation to exactly what it was before the trust was formed. (Co-owned property is returned to both spouses and separately owned property to the owner-spouse.) But while both spouses are living, neither can alone change what they've decided on in the trust—who should get what property when each spouse dies.

Death of the First Spouse

What happens to a joint trust when one spouse dies? When that happens, the trust automatically splits in two.

• Trust 1 contains the deceased spouse's separately owned property and their portion of joint property, except any trust property left to the surviving spouse. This trust is irrevocable and cannot be changed.
• Trust 2 contains the surviving spouse's separate property, their portion of joint property, and any property left by the deceased spouse to the survivor. The surviving spouse can revise or revoke this trust.

The Surviving Spouse as Sole Trustee

The survivor acts as trustee to distribute the deceased spouse's property (what's in Trust 1) according to the terms of the trust, with no modifications. Any beneficiaries named for the deceased spouse's property will get those gifts at this point. Any property left to the surviving spouse goes into the surviving spouse's revocable trust (Trust 2). The surviving spouse is also responsible for managing any Trust 1 property left to a young beneficiary in a child's subtrust (read more about this below). When the surviving spouse has transferred all Trust 1 property to beneficiaries, Trust 1 ceases to exist.

The Survivor's Trust Continues

Trust 2 (the survivor's trust) continues as the surviving spouse's individual living trust. It contains the surviving spouse's individual property, the surviving spouse's portion of joint property, and any property that the survivor inherited from the deceased spouse. The surviving spouse is free to change the trust document as desired. For example, the surviving spouse might name a new successor trustee, add or remove property from the trust, or name a new beneficiary for property that was to have gone to the deceased spouse.

Death of the Second Spouse

When the second spouse dies, the person named in the trust document as successor trustee takes over. That trustee distributes trust property to the beneficiaries and manages any trust property left to a young beneficiary in a child's subtrust.

EXAMPLE: Harry and Maude, a married couple, set up a joint living trust to avoid probate. In the trust document, they make themselves co-trustees and appoint their niece, Emily, as successor trustee to take over after both die. They transfer much of their co-owned property—their house, savings accounts, and stocks—to the living trust. Maude also puts some of her family heirlooms, which are her separate property, in the trust.

The trust document states that Maude's brother will receive the heirlooms when she dies; everything else goes to Harry. Harry leaves all his trust property to Maude.

Maude dies first. The trust splits into Trust 1, which contains Maude's heirlooms, and Trust 2, which contains everything else—Harry's trust property and the trust property he inherits from Maude. Harry becomes the sole trustee of both trusts.

Following the terms of the trust, Harry distributes Maude's heirlooms to her brother, without probate. After Harry has distributed all property in Trust 1, that trust ceases to exist. Harry doesn't have to do anything with the trust property Maude left him; it's already in Trust 2.

After Maude's death, Harry decides to make some changes in his living trust document. He names his nephew, Burt, as successor trustee. He also names his 12-year-old granddaughter, Cecile, to receive some trust property. In the trust document, he provides that if Cecile is not yet 25 when he dies, the trust property she inherits will stay in a child's subtrust, managed by the successor trustee, Burt.

When Harry dies, Burt becomes trustee and distributes the trust property following Harry's instructions in the trust document. He also manages the property inherited by Cecile, who was 21 at Harry's death, until her 25th birthday. The trust ends after Burt distributes all trust property to Harry's beneficiaries.

Conclusion

Joint living trusts aren't the right choice for every couple. Some couples will want to make separate trusts if each spouse owns most of their property separately, or if they want to keep complete control over their own trust property.

For other couples, a basic joint living trust isn't sufficient because they have more complex needs. This is commonly true for couples in their second or subsequent marriage, when they want to provide for their spouse while protecting their children's inheritance. See below for more about this situation.