Why married couples use to have separate living trusts

Bob: My question is about trust.

Attorney Tom Olsen: Got it.

Bob: When we were younger, my wife and I had individual trusts because of our asset values.

Tom: Got it.

Bob: Since retirement, we've been advised that the newest thing lawyers keep telling us are family trust. I'm wondering what are the parameters and are there any downsides?

Tom: Bob, let's start from square one. Many years ago when you did your estate planning, the federal estate tax exemption was a very low number. I can't even remember when it was $250,000, $500,000. To double your estate tax exemption way back in the day when you did this, it required you and your wife to have two separate trusts. That is no longer the case.

In Florida now, an individual can pass up to $13 million free of estate taxes. A married couple can pass up to $26 million free of estate taxes. It does not require that you have separate trusts. Bob, that's why you did separate trusts. These days when people come to see us about trust, they don't need to worry about estate taxes. They're under that $26 million number, therefore, we put them in a joint family trust. One trust would serve you both. When they talk about a family trust, they're really talking about the same thing that everybody else is using out there. It's a revocable living trust. If you came to see me and, Bob, your last name was Smith, I would be naming it the Smith Family Trust. Family is just a word. It's not a type of trust. It's a revocable living trust, Bob. Now, Bob, I know that you and your wife have separate living trusts. Do those trusts own any of your assets?

Bob: Yes. They do. They're both filled.

Tom: Okay. Bob, so you've got these separate trusts. They've been funded. Do you want to undo them, redo them? I don't know. That's a bit of a tough call, Bob. It has something to do with how many assets you have. By the way, how many children do you guys have?

Bob: Two.

Tom: Are they together or from separate marriages?

Bob: Together.

Tom: Bob, it's a tough call. You've got this estate planning in place. They're funded. Do you want to go to the time and trouble to do a joint family trust? Because if you do that, remember, when you sign a trust, it is though you have built an empty vault or an empty safe, and you must then fill it up with your assets. All of your assets, which are currently owned by two separate trusts, you'd have to retitle them into this joint family trust, Bob. I'm not going to tell you it's necessary. I'm not going to necessarily tell you it's a good idea, Bob. Do you understand what I'm saying?

Bob: Yes, and I appreciate that. I think you've confirmed where we were. We're going to redo our trust anyway. The question was whether there were any downsides. We're going to have to go through the exercise. It sounds like there aren't any downsides to just putting it all in one.

Tom: The only downside is, number one, the expense of setting it up, and then, number two, taking all of your assets, which are presently titled in your separate trust, and retitling them into your joint trust, and that includes deeds, it includes bank accounts, et cetera.

Bob: Okay, I appreciate that. Thanks.

Tom: You're welcome, Bob. Alexis, I know that you do probate, but you also do some estate planning for our office. Have you ever heard me talk about these separate living trusts that people use?

Attorney Alexis Richards: I have heard you talk about it, but like you're saying, it's more because of me coming into law now, where I haven't been practicing as long as you, I'm used to seeing the family trust and doing it together. It's unusual for me to see a separate one.

Tom: We used them back in the day. When I became a lawyer, the federal estate tax exemption was $250,000. It just kept going up, going up, going up, and going up towards something like $13 million, $26 million for a married couple. Now, that's going to change in 2025 to something, but still, the vast majority of people who live in the state of Florida, there's not going to be any estate taxes due when they pass away. Estate taxes, also known as death taxes, also known as inheritance taxes. This is just a non-issue for most people.

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