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Choices to Make When Creating a Joint Revocable Trust

The most common trust we write at Lear Life is called a Joint Revocable Trust.

A Joint Revocable Trust is a is a single trust document that two people create to hold title to assets that they own together, typically as a married couple. As a general rule of thumb, both people act as Trustor (the party funding the Trust), and Trustee (the party who administers the assets held by the Trust). This means that, while both people/ spouses are alive and competent, they each retain control over the Trust and its assets, and can change its terms at any time. Further, it is widely excepted that, upon incapacitation of one spouse, the surviving spouse retains control over the Trust. However, once a Joint Trustor passes away, the waters do become a bit murky, and choices must be made.

Choice #1: The Trust Becomes Irrevocable

At times, there are provisions within a Joint Revocable Trust stating that, upon the death of the first spouse, the entire Trust becomes irrevocable. This means that the surviving spouse has no power to change or amend the Trust in any way. The motivation behind this arrangement is to protect the decisions that the couple made together when they were both alive and competent. An additional motive is to guard the couple’s estate in the event that the surviving spouse remarries. The drawback is that it ties the surviving spouse’s hands to decisions that might have been made decades before, rendering them unable to update the Trust in any way and for any reason.

Choice #2: The Surviving Spouse Retains Full Control

The flip side of the above coin is that, upon the death of one spouse, control could simply pass to the surviving spouse, thus allowing them making any changes and amendments that they see fit. This allows the Trust to live and grow along with the remaining Trustor, the estate, and the Beneficiaries. However, there are drawbacks to this scenario as well. Unfortunately, it is all too common for seniors to be pressured by their Beneficiaries, or those who wish to become Beneficiaries, to amend their Trusts. These amendments are often to the detriment of the Trustor and the benefit of the Beneficiary, and the Trustor might not have the wherewithal to refuse to make them.

Choice #3: Appoint a Successor Trustee or Co-Trustee

A middle road is to appoint a Successor Trustee upon the death of the first Trustor. In this arrangement, the Trust remains in effect, but a new party steps in as Trustee and takes on the responsibility for making decisions regarding its assets and distribution. The appointment of a Successor Trustee can be limited to instances where the surviving spouse becomes incapacitated. Or, Co-Trustee, rather than a Successor Trustee, can be appointed to act along side the surviving spouse, who would continue on as Trustee. This way, the surviving spouse is able to retain control over their Trust, but there is a check and a balance in the event of undue influence.

As we've shown, there are advantages and disadvantages to each plan that we have set forth above. Different arrangements favor different situations. We are more than happy to talk through your family’s situation and figure out which arrangement would best suit you. Contact us today to set up your free consultation.


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