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.
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.
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.