If you own property with another person, such as a spouse, you might be concerned about what happens to the other person's ownership stake once you put it into a living trust. You can put jointly held property in a living trust. However, what you end up placing in the trust depends on the structure by which the property is held jointly as well as the structure of the trust. In some cases, it might be unnecessary to put the property in a trust at all.
You can put jointly held property into a living trust, but what can be placed in the trust relies on the structure of the trust itself.
Joint Living Trusts
One simple way to put jointly held property into a living trust is to create a joint trust. With a joint living trust, you and another person own the trust and the assets it may contain. If one of you dies, the assets stay in the trust for the other person without that other person having to do anything about it.
Personal Interest and Joint Property
If you have jointly owned property but a separate trust, you can also put your interest in the trust. For instance, if you hold a property as a joint tenant with a parent and you want to protect your rights to it, you could put your ownership in a trust. This won't affect the rights of the parent, but if something happens to you, whatever interest you have in the property will be handled by the trust instead of going through probate.
Joint Trusts and Community Property
When you are married and live in a state with community property laws — usually one in the western United States — a joint trust can make particularly good sense. In those states, assets that a married couple have are typically owned together rather than separately. As such, blending them in a second trust just matches what the reality of their ownership would be. This is different from a non-community property state, where you and a spouse can have separate assets if you wish.
When Trusts Aren't Necessary
The primary benefit of a living trust — especially a revocable one — is the ability to keep the assets in the trust out of probate. However, when assets are held jointly, they usually stay out of probate anyway when they pass between the joint owners. If you and your father own something jointly, for example, it shouldn't have to go through probate when your father passes away. Transfers between spouses usually avoid probate as well. As such, you might not need a trust at all for your jointly held assets.
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- How Does a Trustee Terminate a Revocable Family Trust?
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- What Is the Difference Between a Land Trust Vs. a Family Trust?
- Joint Ownership Bank Account Risks
- Difference Between Survivor & Exemption Trusts
- The Disadvantages of Successor Co-Trustees in a Trust
- Second Marriage Estate Planning & Prenuptial Agreement