A joint trust is a trust created during your lifetime, where both you and at least one other individual are the Grantors (creators). These are almost always “inter vivos” (created during your life, and not by a will upon your passing), and tend to be done by happily married spouses. While they tend to simplify most people’s estate plans by only having to deal with one document, joint trusts also have a time and a place when they should be avoided.
The most ideal time to utilize joint trusts is when the creators of the trust are (1) married, (2) want the same end-result for the funds, and (3) trust the surviving creator to control the funds when he/she passes away. A couple who own real estate together, have other jointly owned investments and share children are ideally suited for this type of document, particularly if they wish to avoid probate upon the second spouse dying. Couples who have estates which may have estate taxes should attempt to transfer all properties to the surviving spouse, who then has the right to disclaim funds to an irrevocable credit shelter trust, thereby better ensuring the estate can adjust to changing estate tax environments.
The worst times to create a joint trust are when (1) contingent beneficiaries differ, such as a second marriage which is disapproved of by children from a prior marriage, (2) the couple is unmarried but have ample assets, thereby creating complications for estate taxes and eliminating one person’s estate tax exemption, (3) where there are assets which could just as easily been left outside of trust through TOD or ITF accounts because future beneficiaries don’t have creditors or special needs issues, and (4) when spouses don’t trust each other not to raid trust funds for purposes the deceased spouse would not approve of. In addition, beware of a couple who may be reasonably expected to get divorced, as the terms of the trust may allow one spouse to control all trust assets without the other’s on-going consent.
If you and your spouse feel you share the same end-of-life goals, share much of your assets and do not have an over-abundance of assets, consider asking your attorney about the pluses and minuses of a joint trust.
