For married couples, creating a shared estate plan can be a smart decision under certain circumstances. Let’s explore how a shared living trust compares to other options and how it can provide flexibility and protection for both spouses.
The Limitations of a Joint Will
When people first think about estate planning, a simple will often come to mind. While this can work in certain straightforward situations, it might not always be the best choice for married couples.
One option is to create a joint will, which allows both spouses to leave everything to one another and name beneficiaries for the next generation. Most often, this involves naming children as beneficiaries.
However, joint wills come with significant limitations. Once one spouse passes away, the surviving spouse has no ability to alter or revoke the terms of the will.
This can create problems if circumstances change, such as the need to adjust the distribution of assets to support family members or respond to unforeseen financial needs.
Additionally, a will requires the estate to go through probate, a court-supervised process that can be time-consuming and costly. Inheritors will receive their inheritance as a lump sum, which lacks asset protection or safeguards for individuals with poor financial management skills.
Shared Living Trusts Offer Flexibility and Control
For married couples with significant community property, a shared living trust is a better alternative. A living trust allows both spouses to serve as co-trustees during their lifetimes.
Together, they manage the assets placed into the trust and typically name their children as beneficiaries. A successor trustee is also appointed to take over trust management when both spouses have passed.
One major advantage of a shared living trust is that either spouse can revoke or amend the trust during their lifetime, providing flexibility. The surviving spouse retains control over the community property within the trust after the other spouse passes away.
Each spouse can also transfer separately owned property into the trust if they wish. In these cases, they can choose to leave it to their spouse or name a different beneficiary for their separate property.
After one spouse passes, the surviving spouse cannot alter the terms regarding the deceased spouse’s separately owned property. This approach preserves the wishes of the deceased spouse while still offering the surviving spouse control over shared assets.
Protecting Against Incapacity
Incapacity planning is another key feature of a shared living trust. As we age, there is always a risk of cognitive decline or medical issues that impair decision-making.
With a living trust, you can designate a disability trustee to step in if the surviving spouse becomes incapacitated. This ensures that someone trusted will manage the trust and its assets if either spouse is no longer able to do so.
This proactive planning helps avoid a guardianship process and provides peace of mind that assets will be managed according to the couple’s wishes.
Simplifying Transfers to Beneficiaries
Another advantage of a shared living trust is that it bypasses the probate process. When the surviving spouse passes away, the transfer of assets to the beneficiaries can happen without court involvement. This not only saves time and money but also keeps the process private.
Additionally, you can include spendthrift provisions in a living trust. This means that the beneficiaries won’t have direct access to the principal of the trust.
The trustee, who you appoint, will manage the assets and make distributions according to your instructions. This protects the inheritance from creditors and ensures that beneficiaries with poor financial habits don’t waste their inheritance.
You can also structure the distributions in a way that works best for your family. For instance, instead of providing a lump sum, you can instruct the trustee to distribute smaller amounts over time.
Including a Pour-Over Will
Sometimes, assets may not be transferred into the living trust during your lifetime. To account for these, you can include a pour-over will in your estate plan.
A pour-over will automatically transfer any remaining assets into the trust after your passing, ensuring that all property is managed under the terms of the trust.
This makes asset management smoother and more efficient while avoiding potential gaps in your estate plan.
Need an Estate Planning Lawyer in Tucson, Oro Valley, Phoenix, or Scottsdale, AZ?
We are here to help if you are ready to work with an attorney to put a plan in place. You can call us at 888-222-1328 to schedule a consultation, and you can alternately send us a message through our contact form.
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