Many married couples see their accounts and property as “yours, mine, and ours,” especially if one or both partners have remarried, wedded late in life, or have brought or will bring considerable sums of money and assets into the marriage. Choosing what should unfold to all of these assets and properties after death can be a difficult task. To reduce some of the stress associated with such decisions, estate litigation lawyer recommend a one-of-a-kind estate planning mechanism known as the pour-over trust.
What Is A Joint Pour-Over Trust?
Your and your partner’s joint property is held in a joint pour-over trust. You can establish a joint trust and appoint yourselves as current administrators. When the first of you dies, half of the assets and properties in the joint trust are dispersed (pour over) to the dead spouse’s independent trust, and the other half is allocated to the survivor’s separate trust.
Does this imply that we’ll require three trusts?
Three trusts may be required for the advance directive to function correctly. Property acquired jointly goes into your combined pour-over trust, while property owned separately goes into your own independent trust. This enables you to set distinct directions for jointly and individually held accounts and property. Notwithstanding, once the first of you passes and the funds and property are allocated to the various individual trusts, the combined pour-over trust has no further function. As a result, it will not necessitate a prolonged, continuous administration following the first death.
What Are Some Other Benefits Of A Joint Pour-Over Trust?
EASY FUNDING OF THE TRUST
Because you jointly own it, a joint pour-over trust makes it easy to finance your joint funds and property into it. While two persons can jointly possess an account, certain financial institutions will not permit two corporations to manage the same account jointly. This technicality can occasionally derail your plans or enhance the possibility of probate if both of you pass concurrently while still jointly controlling your funds and property.
Because both of you retain authority over your shared estate, the joint trust simplifies lifelong management.
AVOIDANCE OF PROBATE
A common motivation for choosing a trust-based plan is to avoid probate. If you and your spouse have joint assets and property in a trust and both die away simultaneously, your family members can prevent probate since the trust rules will govern what becomes to the funds and properties. Your backup administrator will carry out the orders without the court’s intervention. Your estate lawyer can help you draft a directive that will assist your family in avoiding probate.
KEEPING THINGS DIFFERENT
Allocating your combined assets to the joint pour-over trust and your individual funds and properties to your individual trusts keeps your separate accounts and property distinct and make it simpler to run the trusts as per your desires. If you or your partner had children from a prior relationship for whom just one of you wants to provide after death, such an agreement might be beneficial. However, in other situations, these assets or pieces of property may already have been managed individually, so combining them in a joint trust may confuse the issue and go against your wishes.
DOUBLE STEP UP IN TAXES.
In a community property state, putting your joint accounts and assets in a joint pour-over trust would permit the two of you to keep your accounts and property as shared assets, providing for the twofold step-up in tax basis. You may lose the double step-up in basis if you split possession of these funds or property among two separate trusts.