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What happens to a joint revocable trust when one spouse dies?
In this article, you’ll learn about:
Let’s dig in.
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A joint revocable trust is a type of estate planning tool often used by married couples to manage and distribute their assets.
It allows the couple to:
Couples do this because probate can be time-consuming and costly.
When one spouse dies, the process that follows can vary depending on the terms of the trust and the state law.
However, the following steps generally occur:
Read More: Can I Set Up A Trust Without My Spouse?
Upon the first spouse’s death, the trust assets are typically divided into two separate trusts:
The division doesn’t require any actual movement of assets; it’s more of an accounting or bookkeeping function.
Read More: Does Your House Have To Be Paid Off To Put It In A Trust
The death of one spouse can have tax implications.
In general, the assets in the decedent’s trust are not subject to estate tax upon the surviving spouse’s death.
This can help preserve more of the estate for the beneficiaries.
However, the specific tax consequences can vary greatly based on the estate size and the state law.
So it’s usually advised to consult with a tax professional or a trust attorney.
Read More: Do I Need A Trust To Avoid Probate
The surviving spouse, or another person designated in the trust, often becomes the trustee upon the first spouse’s death.
This person is responsible for managing the trust assets according to the trust’s terms and state law.
These responsibilities include:
When one spouse dies, a joint revocable trust splits into two trusts:
The first step is to value all the assets in the trust.
This means finding out how much everything is worth in current market terms.
Next, the assets get allocated to the two trusts.
How this split happens depends on:
The Decedent’s Trust often gets funded up to the limit of the deceased spouse’s estate tax exemption.
This is done to use the tax benefits fully and save on estate taxes later.
Once funded, the Decedent’s Trust can’t be changed; it’s now irrevocable.
The remaining assets go to the Survivor’s Trust.
The surviving spouse can manage these assets freely, just like before.
They can also change the terms of the Survivor’s Trust if they want to; it stays revocable.
Lastly, the split of assets is documented for records and tax purposes.
This is known as “funding” the trusts.
The assets themselves don’t need to be physically divided or moved.
A joint revocable trust is a type of legal agreement.
It allows two people, usually spouses, to manage their assets together.
They can put property like investments, money, or houses into the trust.
The trust is “revocable,” which means the couple can change it or cancel it anytime while they’re both alive.
In the trust document, they name themselves as the trustees.
They control what’s in the trust.
They can buy or sell property, earn money from it, or spend it as they see fit.
The couple also names people who will get the trust’s assets after they die, known as beneficiaries.
The trust document states how to split the assets among these beneficiaries.
If one spouse dies, the surviving spouse continues to control the assets.
The trust becomes “irrevocable” after the first spouse’s death.
It means it can’t be changed anymore.
When the surviving spouse dies, the assets go directly to the beneficiaries.
They avoid the time and expense of probate, a legal process that can happen when a person dies.
Read More: How Long Do You Have To Transfer Property After Death?
Yes, a part of a joint revocable trust does become irrevocable when one spouse dies.
Specifically, the portion of the trust assigned to the deceased spouse, known as the “Decedent’s Trust,” becomes irrevocable.
This means that no one can change the terms of this trust after the spouse’s death.
On the other hand, the portion of the trust assigned to the surviving spouse, known as the “Survivor’s Trust,” typically remains revocable.
This means that the surviving spouse can still modify the terms of this part of the trust.
Read More: How To Put House In Trust With Mortgage
Yes, a surviving spouse can change a trust after the death of the other spouse, but this depends on the type of trust.
If it’s a revocable trust, the surviving spouse, often the trustee, can usually make changes.
This includes changing beneficiaries, distributing assets, or even revoking the trust entirely.
However, let’s say it’s an irrevocable trust, such as a Decedent’s Trust or Bypass Trust set up after the first spouse’s death.
The surviving spouse generally cannot change it.
The terms, assets, and beneficiaries in an irrevocable trust are usually fixed and cannot be altered after it’s created.
Even when changes are allowed, they must always:
Read More: Does The Beneficiary Own The Trust Property?
A Joint Revocable Trust often includes a provision known as a “step-up in basis.” Here’s how it works:
Read More: How Much Do Trusts Cost?
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