Married in Massachusetts? A Joint Revocable Living Trust May Be Your Best Option
If you have minor children or children under 30, there are many benefits to incorporating a revocable living trust (RLT) into your estate plan. RLTs can keep your loved ones and your personal affairs far, far away from the Massachusetts Probate and Family Court if something happens to you. If estate taxes are a concern, RLTs can reduce or even eliminate those taxes so you can pass on more money to the next generation.
Think of an RLT as a shopping basket you can fill during your lifetime with assets such as your home, your bank accounts, and even your tangible personal property. Filling your basket with assets during your life keeps those assets out of the Court’s jurisdiction when you die. Instead of a court process, the intact basket of assets is passed along to the trustee you have named in your RLT Instructions and all of your affairs can be settled in private. Best of all, when trust assets are inventoried and assigned properly, your loved ones won’t have to go on a scavenger hunt to try and figure out what you owned and how to get access to it.
Massachusetts married couples can choose to set up a joint RLT or separate RLTs as part of their estate plan, depending on each family’s specific situation and planning objectives. Although many Massachusetts law firms default to separate trusts when they encounter any married couple, we believe that there are many situations where a joint trust might make better sense. Here are some reasons why we love the joint RLT for many of our clients with minor and young adult children:
A joint RLT is easier to fund and maintain during your life.
An RLT can save your family time and money if you get sick or pass away, but only if you’re able to transfer assets to your RLT during your life. It’s very common these days for married couples to hold assets jointly and to think about ownership in terms of what we own together...not what I own on my own. It can be difficult to fund joint account into separate RLTs, and so these accounts often get left out of the funding process, triggering a potential probate. Although one solution to this is to separate joint brokerage accounts, or create a third trust to hold jointly owned real estate or other assets, this can make holdings so complicated that clients give up on funding or maintaining accounts once established. With a joint RLT fewer assets are likely to fall between the cracks.
A joint RLT can be significantly less expensive.
Most estate planning lawyers have moved away from a billable hours model and towards flat fee or project-based pricing. The more RLTs involved, the more expensive your plan creation, initial funding, and ongoing maintenance is likely to be. And while price isn’t the only consideration, the difference in price between a joint RLT and a complicated separate RLT scheme may result in families delaying planning completely.
Both joint and separate RLTs can provide Massachusetts estate tax protection.
When estate taxes (sometimes called transfer taxes or death taxes) are due, they must be paid before any beneficiaries of the estate can get a distribution. This can be a disaster when a minor child has lost a parent or parents and their guardian can not get access to the money needed to care for them. Not all families will need to consider the impact of estate taxes, but it’s a common issue for a good number of Massachusetts families who own appreciating real estate, retirement accounts, brokerage and bank accounts, and life insurance.
Under current Massachusetts law, if an individual's assets are valued at over $2 million when they die, Massachusetts estate taxes will be due. Married couples can defer these taxes at the first spouse's death, and eliminate or reduce them at the second death with appropriate trust planning. While it is accurate that separate RLTs can provide tax mitigation for clients facing this problem, a properly drafted joint RLT can achieve the same marital deduction planning.
Sometimes, separate RLTs are more appropriate.
You should consider separate RLTs if you are in a blended family situation where you have different obligations. Separate RLTs are probably best if partners feel strongly that their assets should be kept separate during their lifetime or partners want to distribute their assets in different ways after each dies. Sometimes, one client has significantly more wealth than the other client or is expecting an inheritance they aren’t going to want to share. Finally, separate RLTs may insulate one spouse from the creditors of the other.
The bottom line is, there are good reasons for using joint RLTs and good reasons for using separate RLTs…so it’s important to understand which approach is right for you. Your family deserves the care and attention of a law firm that sees your situation as unique and doesn’t apply a cookie-cutter planning strategy based on your marital status alone. If you have questions about estate planning, we offer a complimentary initial phone conversation.
This article is a service of Modern Legacy Law Group, PLLC. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Legacy Planning Session, during which you will get more financially organized than you’ve ever been before. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice.
