Joint vs. Individual Trusts in Separate and Community Property States

For some families, choosing between a joint or individual trust is a critical component that significantly impacts gift and income taxes. If both spouses want the surviving spouse to have full control over the assets in the trust and have the same beneficiaries of the residual estate, then a joint trust may be ideal. Individual trusts may be the best option for couples with certain assets, separate finances, prenuptial agreements, or second marriages. Estate planners must carefully consider applicable state laws and potential tax implications when deciding on the best structure.

Estate planning counsel should anticipate and avoid tax pitfalls when structuring joint trusts in separate property states. Where the spouses contribute unequal amounts, funding the trust may trigger gift tax if the trust instrument does not correctly assign the power to revoke or withdraw assets.

There are also income tax risks in structuring a joint trust in a separate property state. Estate planning counsel must identify hidden tax risks and manage them by carefully drafting the trust document.

Listen as our experienced panel explains how to structure joint and individual trusts in a separate property and community property state.

1. Community property states
   1. Tax and non-tax considerations
   2. Gift and estate tax issues to avoid in funding and administering
   3. Income tax issues and potential advantages
   4. Drafting recommendations and resources
2. Separate property states
   1. Tax and non-tax considerations
   2. Gift and estate tax issues to avoid in funding and administering
   3. Income tax issues and potential advantages
   4. Drafting recommendations and resources
3. Transitioning from community to separate property states and vice versa
   1. Navigating state law issues
   2. Tax and non-tax considerations
   3. Gift and estate tax issues
   4. Income tax issues and potential advantages
   5. Drafting recommendations

The panel will review these and other key issues:

• What are the gift, income, and estate tax risks of utilizing joint vs. individual trusts in separate and community property states?
• What are the administrative and accounting costs associated with the use of joint trusts in separate property states?
• Coordinating joint revocable trusts with credit shelter trusts
• Drafting general powers of appointment in joint revocable trusts in separate property states

Learning Objectives

After completing this course, you will be able to:

• Recognize the gift, income, and estate tax risks of utilizing joint vs. individual trusts in separate and community property states
• Identify key tax issues when coordinating joint revocable trusts with credit shelter trusts
• Understand gift and estate tax issues to avoid in funding and administering trusts

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Test746

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).