SURVIVOR'S TRUST VS. JOINT TRUST
Many married couples share almost everything, including finances. Many of our clients choose to have one joint living trust instead of two. A joint trust can be structured so that when one spouse passes away, the trust is split into two sub-trusts: a survivor’s trust and a decedent’s trust.
This arrangement provides the surviving spouse with the same flexibility that separate trusts offer. The surviving spouse has full control over their survivor’s trust but may have limited control over the assets in the decedent’s trust.
What is a Decedent’s Trust and What is a Survivor’s Trust
If a couple chooses to combine their assets into a joint revocable living trust, both spouses will usually be named as trustees and beneficiaries. The joint trust can instruct that when one spouse passes away, the trust divides into sub-trusts.
One of those sub-trusts can be a survivor’s trust. A second sub-trust, the decedent’s trust, will also be created to hold and manage assets owned by the decedent.
How a Survivor’s Trust Works
In Ohio, a typical joint trust arrangement lists three types of property:
First spouse’s independent property
Second spouse’s independent property
When the first spouse dies, the survivor’s trust receives half of the joint property and all the surviving spouse's independent property. The deceased spouse’s half of the joint property, along with their separate property, may be funded into the decedent’s trust with its own set of instructions. The trust agreement could also state that all the deceased spouse’s property will go into the survivor’s trust instead of going into a separate sub-trust.
Reasons to Have a Survivor’s Trust
Regardless of exactly how the joint trust assets are allocated, a crucial distinction is that a survivor’s trust is revocable, while the decedent’s sub-trust is irrevocable.
This means that the surviving spouse retains full control over the survivor’s trust. They can alter the terms of the trust however they want. For example, they can add and remove assets, change beneficiaries, appoint new trustees, or terminate the trust. The surviving spouse can also completely change the terms of the survivor’s trust in its entirety.
While the surviving spouse may be the beneficiary of the decedent’s trust, the surviving spouse will likely have less control over the management of assets in the decedent’s trust. This allows the deceased spouse to put protective measures in place. They can do this while alive to make sure that their assets are managed the way they want and that someone cannot change the rules after they pass away. This can be helpful for clients who are worried about their spouse remarrying after their death.
The purpose of any trust is to take care of loved ones and protect assets from costly probate. To discuss an estate plan that meets your goals, schedule an appointment with our estate planning attorneys by calling 614-389-9711.
About the Author - Gregory S. DuPont, JD, CFP
Greg has been serving clients as an estate and tax planning attorney in Ohio since graduating from Capital University Law School in 1992. He obtained an accounting and finance degree from The Ohio State University. As a Certified Financial Planner, a designation that requires advanced coursework in a complete range of financial subjects, he is a rare financial professional who can provide cross-disciplinary solutions from the legal, tax and investment perspectives.
Greg is the co-author of the book: Protecting Your Future with Tax-Free Long-Term Care, and is a contributing author in Jack Canfield's best selling book The Recipe for Success.
He has been named one of Ohio's Top 100 lawyers, an invitation-only designation given by The National Advocates.