Karen E. Boxx, The Use of Joint Revocable Trusts for Unmarried Couples, Prac. Law., June 2015, at 53.
The Use of Joint Revocable Trust for Unmarried Couples
joint revocable trust, unmarried couple
One solution for unmarried couples who own real estate together is to use a joint revocable trust, similar to the joint trust used by married couples in community property jurisdictions as their primary estate planning document. The trust usually provides that while both spouses are alive they are both beneficiaries of the trust and both hold powers of revocation and amendment. At the death of the first spouse, the trust assets are divided into the deceased spouse’s assets and the survivor’s assets, and the deceased spouse’s assets are held in further trust or distributed in a manner consistent with the deceased spouse’s intentions (including tax planning). At the death of the survivor, the trust agreement generally provides for distribution of the survivor’s assets (including holding in further trust) in a manner consistent with the survivor’s intentions. The joint trust is the primary estate planning document for the couple, and each spouse executes a pourover will that names the joint trust as the beneficiary of the estate.
Joint trusts have not been traditionally used in common law states for married couples. More common is the practice of creating a separate trust for each spouse. The uncertainty of gift tax consequences and the possibility of adverse estate tax consequences caused practitioners to favor separate trusts. In community property states, however, joint trusts are favored because the spouses own undivided interests in the community property. The increase in the exemption from federal estate tax, and the wave of state legislation allowing tenancy by the entireties property (which has favorable creditor protection but is only available to married couples) to be placed into trust have made joint trusts more attractive in common law states. These materials address the advantages and disadvantages of joint trusts for co-ownership of real estate by unmarried couples.