Having a trust is essential for comprehensive estate planning protection. However, if you are married, you will need to be more mindful of how you want to take care of your family. In your estate planning, you must decide if you want to do one Joint Trust or two Separate Trusts. Below are some of the factors to consider in weighing out the pros and cons of each option.
Asset Protection
When it comes to protecting what you have earned, the type of trust you decide on holds a significant impact.
Joint Trust
- It provides less asset protection because the marital assets are together in a single trust. If there’s ever a judgment over one of the spouses, all of the assets could end up at risk.
Separate Trust
- It provides more asset protection because the individual assets are separated into two trusts. There is better financial protection, but it is important to note that this can also be influenced by other external factors, such as prenuptial agreements.
Tax Benefits
While most people do not have to worry about paying federal taxes on their estate, other forms of taxation should be taken into consideration.
Joint Trust
- Assets and property can earn the same marital deduction.
Separate Trust
- If you have a large estate, a separate trust may be preferable. Be sure to note that this only applies to $11.58+ million per individual or $23.16+ million per married couple.
During Lifetime and After Death
There are major differences in how each type of trust is handled. While the joint trust is simpler during your lifetime, it tends to be more difficult after your death.
Joint Trust
- Administering the trust during your lifetime is likely to be easier. Each spouse has equal control as to how the assets are managed.
- Ideally, couples will agree on how to distribute their assets after one passes away. There are cases where the assets need to be divided into separate trusts.
Separate Trust
- Administering the trust during your lifetime may be more complicated. Since there are two trusts, it will not be as simple. It is very common for each spouse to name another as a co-trustee.
- There is often much more flexibility upon a spouse's death making the process far easier to navigate. The surviving spouse would be unable to amend or revoke any portion of the deceased spouse’s trust. The trust becomes irrevocable upon the first passing.
Overall, there are positive and negative aspects to each type of trust. To decide what type of trust is best for you, contact the Law Office of Inna Fershteyn at (718) 333-2394.