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Choosing Between Joint and Separate Trusts

joint and separate trusts

Weighing the merits of both trust types

Estate planning is the method of legalizing a roadmap to provide financially for the surviving spouse and children once the other spouse departs Earth. Normally, assets are distributed according to the wishes of the spouse, with the decedent leaving a good portion of his or her property, financial accounts and heirlooms to the widow. The remaining assets are disbursed to the surviving children and others.

In common planning scenarios, both joint and separate trusts are viable estate planning vehicles. Which is more suitable for your needs is open for debate, so we will separate the two for purposes of clarity.

Separate Trusts

As the name implies, separate trusts allow each spouse to form their own estate. Assets they personally accumulated prior to marriage can be added to the estate, along with wealth gathered throughout their married life. Because Illinois is not a community property state, couples may opt for separate trusts if they “blended” families or have assets they want to go toward a specific cause or individual.

Other factors to consider before choosing a separate trust:

  • Prenuptial agreements will make this trust type much easier;
  • Each spouse retains full control over their assets in this trust type;
  • Unless the heir is the surviving spouse, a fairly lengthy legal battle may ensue to move assets from the decedent’s trust into the surviving spouse’s trust.

Joint Trusts

Many trusts are jointly formed in Chicago. Using this estate planning vehicle offers couples an easier method of transferring property upon the other spouse’s death. One benefit that makes joint trusts attractive is that couples with separate property can add that property to their estate, but name separate heirs of that property.

Additional benefits of using a joint trust:

  • Either spouse can revoke the trust and revert the property back to its original ownership;
  • Major assets, such as homes or vacation property, are more difficult to allocate in separate trusts. In joint trusts, you could split property into halves, thirds, quarters and so forth, leaving an equal share to each heir.
  • Because Illinois does not have a community property law, spouses can choose (or choose not to) add or revoke assets without leaving a potential squabble for heirs in the event both spouses pass away simultaneously.

Deciding Between Joint and Separate Trusts

Your estate planning attorney will sit down and discuss the benefits and drawbacks of using either type of trust. Both are structured to allow the surviving spouse and children to benefit from the wealth accumulated by the decedent, and both can be updated as wealth is lost or gained.

Sit down with your children and significant other and discuss joint and separate trusts, and what to expect should either spouse pass on. Let each potential heir know your feelings, what you intend to leave them, and how each trust type could benefit the family, the estate, and the spouses working hard to make sure loved ones are left an equal share of wealth.

To learn about separate trusts and joint trusts in greater detail, schedule a consultation with The Law Office of David Birks today.

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How Pour-Over Wills Differ from Standard Wills

Pour Over Wills

Both are vital instruments. But are they both necessary?

Although they are commonly used in the same sentence, wills and trusts are not the same. That said, one document exists that can work in synchronicity with trust-based estate plans, called a pour-over will. Depending on your needs, you may find this document useful if your estate planning attorney believes it would benefit all parties involved.

Pour-over wills differ from standard wills in several ways, which we will touch on below.

Standard Wills

To carry out your final wishes once you depart earth, a standard will is completed. This legal instrument is drafted by an attorney, and contains a preamble, directives for funeral and burial expenses, section for asset division, one or more residuary clauses, administration section, and directions for guardianship over pets and children. Testator witnesses and signatures finalize the document.

Illinois has rules regarding standard wills that must be followed in order to legalize the document.

Pour-Over Wills

Much like standard wills, a pour-over will allows you to designate a guardian over minor children along with an executor, or an individual who manages the probate estate should one be required.

One key difference between pour-over wills and standard wills is asset distribution. Whereas standard wills designate to who or where money and property will be diverted, pour-over wills reference trusts and allow the distribution of assets to be handled in your probate estate. Should your wishes change over time, you need only update your trust.

In short, this type of will addresses assets that may have been left out of – or “pour over” – your trust.

One Pitfall in Pour-Over Wills

As most pour-over will assets are personal, the probate process cannot be avoided if those assets exceed $100,000 or involve real estate, according to Illinois law. The probate process may be significantly quicker than assets left up to intestacy laws, although the process must run its course if multiple parties are expected to benefit from the pour-over.

If you transfer most of your assets into a living trust while you are alive, not much will require the use of a pour-over will.

At the end of the day, whether or not you need this extra document will depend on what your attorney advises. Pour-over wills can simplify excess assets when your loved one passes away, or oversimplify the functions already performed by a living trust.

Follow our blog as we discuss other types of wills, the probate process and what you can expect from an estate planning attorney.