Joint Revocable Living Trusts For Parents with Minor Children

In Michigan, establishing a Joint Revocable Living Trust as part of your estate plan can be an excellent choice if you have minor children or young adult children.

What is a Joint Revocable Living Trust?

A joint revocable living trust (JRLT) is a single trust document that two persons establish to hold title to assets which they typically own together as a married couple. While both spouses are alive and competent, they both retain full control of the trust and can change the trust at any time.

After the death of one spouse, the surviving spouse continues to have control over the trust. Upon the death of the surviving spouse, the trust becomes irrevocable. The designated successor trustee then takes control of the trust and distributes the trust assets as directed in the trust document.

Given the current increased federal estate tax exemption, more married couples are using a Joint Revocable Living Trust as a practical and cost-efficient estate planning tool, particularly if they have minor or young adult children.

When does a Joint Revocable Living Trust work best?

A JRLT usually works best when the following circumstances exist for a couple:

• The couple has a long, stable relationship and divorce is not a concern.
• The couple is in complete agreement on how the assets will be disbursed when both have died, regardless of the order of death.
• The couple, for the most part, owns property jointly and has joint banking and other financial accounts.
• The value of the couple’s assets is less than the federal estate tax exemption amount. (For 2024 this amount is $13.61 million per individual and $27.22 million for a married couple).

Advantages of a Joint Revocable Living Trust

A Joint Revocable Living Trust is relatively easy to administer. Its advantages also include:

• Probate court is avoided, minimizing time and expenses both before and after the death of the surviving spouse.
• The probate court does not have to be involved for the distribution of trust assets and property to children.
• The terms of the trust are private because probate court is not involved.
• The couple does not have to worry about two separate trusts and what assets are in each trust.
• Typically, no transfer of assets occurs after the death of the first spouse.
• Beneficiary designation and enhanced life estate deeds (lady bird deeds) can be used as a cost effective and direct way to transfer real estate and assets into the trust after the death of the surviving spouse.

A JRLT allows both parents as well as a surviving parent to maintain complete control over the trust during their lifetimes. It also establishes clear and detailed instructions for the management and distribution of trust assets to their children upon their death. Parents are able to specify when children are to receive trust assets and how assets are to be held in trust for a child’s benefit. This can apply not only for minor children but also for young adults who may not yet have the financial maturity to manage direct distributions of large sums of money.

A JRLT is much more flexible than a Will and gives parents more control over the distribution of property and assets to their children. For example, the Trust document can instruct the successor trustee to distribute all or portions of trust property when a child reaches a specified age. Many parents also prefer that distributions be made over an extended period of time in order to provide for their children’s college education or other vocational pursuits after high school. A JRLT can also instruct a successor trustee to use their own judgment when making distributions if a child has serious problems that would cause them to mismanage or misuse distributions.

A JRLT can also be amended at any time during the lifetimes of both parents and the lifetime of the surviving parent if family circumstances and dynamics change.

Selecting a Successor Trustee

One important consideration for ensuring that the assets held in trust will be managed and properly distributed for children is the parents’ selection of a successor trustee who will step in and take control of the trust upon the deaths of both parents. A successor trustee plays a crucial role in managing trust assets and ensuring the well-being of the children. Consequently, choosing a trusted and responsible individual is vital because usually the successor trustee will be providing for the child’s health, education, welfare and housing if the parents are not available. In addition, consideration should be given to persons who have an understanding of the parents’ family values and who will carry out the parents’ intentions faithfully. It is also beneficial if the successor trustee has the judgment and skills to manage the trust however a successor trustee is usually given the power to engage with others to help with the management of the trust if necessary.

Should a Joint Revocable Living Trust be Included in Your Estate Plan?

With the right circumstances, the use of a Joint Revocable Living Trust can be an effective estate planning tool for parents with minor and young adult children. A JRLT is not the estate planning answer for all couples. However, if a couple is interested in a JRLT, they should consult with an experienced estate planning attorney so that all issues will be thoroughly evaluated. Contact Bill Ager for a free consultation to discuss whether a Joint Revocable Living Trust should be included in your estate plan and how it can be done for a reasonable flat fee.

Contact Bill Ager directly at (734) 649-0784, at bill@agerlawoffice.com or use our online contact form.