Many couples, especially those who have been married more than once, have accounts and property that they consider as yours, mine, and ours. Developing an estate plan to determine what happens to accounts and property that belong to one or the other partner in a couple and the account and property that belong to both can be a huge undertaking, consider an estate planning tool known as a pour-over trust to handle this challenge.

What is a joint pour-over trust?

A trust holds property and accounts for the trustmaker or grantor. A trustee manages the trust. A joint pour-over trust holds you and your spouse’s jointly owned property and accounts. You and your spouse serve as co-trustees of the trust and manage the property and accounts.

When either you or your spouse dies, the accounts and property or equally divided, with half of them distributed (pours over) into the deceased spouse’s individual trust and half is distributed to the living spouse’s individual trust.

For this plan to work, you may need to establish three trusts, two separate ones for each member of the couple, and a joint pour-over trust.

This allows each member of the couple to leave specific instructions for their separately owned property and accounts. They can jointly decide how to manage their shared accounts and property.

When one member of the couple dies, the joint pour-over trust can be dissolved as it will no longer have a function.

What are the Advantages of a Joint Pour-Over Trust?

Besides the ability to handle jointly owned property and accounts with ease, a joint pour-over trust has the following advantages:

• Easily funded: It is easy to fund a joint pour-over trust because both members of the couple control the jointly owned property and accounts. Although a couple can own a joint account together, some financial institutions will not allow two trusts to own the same account. This can make it difficult to plan how to manage joint property, and it can be difficult to settle your estate if both of you die simultaneously.
• Easily administered: A joint pour-over trust is easily managed because both members of the couple can serve as joint trustees and retain control over the shared property.
• Avoids probate: A trust-based estate plan can help you avoid the probate process. If both you and your spouse die simultaneously, assets in your joint pour-over trust will move to your separate trusts as instructed in your trust documents. Probate will not be necessary because your backup trustee can carry out your trust instructions without court supervision.
• Keeps separate property separate: Keeping your separate property and accounts in your separate trusts and allocating your joint property to your joint pour-over trust makes it easy to manage each of the trusts according to each person’s instructions. This allows each of you to pass your property and estate to your loved ones in the way you want, which is especially beneficial for couples who have children from other relationships.
• Keeps the double step-up in tax basis: If you live in a community-property state, using a joint pour-over trust may enable you and your partner to keep the community property nature of your accounts and property. This will allow for a double step-up in tax basis, once at each partner’s death. If you divide jointly owned property, you may lose this tax benefit.

If you and your partner have separately owned and joint-owned property and accounts, contact us today so we can assess what you own and how you own it. We can help you develop an estate plan that ensures that each of your properties is distributed to your loved ones according to your wishes.

You can schedule a call with us or reach us directly at 855.631.3457 to learn more about how best to plan today to protect those most important to you.

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