When married couples do their Estate Planning, if they decide to use Revocable Living Trusts to achieve their Estate Planning goals, the decision has to be made as to whether the married couple will use a Joint Revocable Living Trust for the couple, or if they will use Separate Revocable Living Trusts.
There is nothing wrong with having a Last Will & Testament as your Estate Planning document for when you pass away. However, married Farmers and Ranchers have a particular situation that makes utilizing Separate Revocable Living Trusts appealing. Not to say that a Joint Revocable Living Trust is not a great option for a Farming and Ranching couple, but certain situations can make Separate Trusts a better option. This Article intends to provide some of the advantages associated with Separate Revocable Living Trusts for Farming and Ranching families, though many of the advantages of Separate Revocable Living Trusts discussed in this Article are applicable to all married Nebraskans.
1. Separate Revocable Living Trusts May Offer Better Protection From Creditors.
Upon the death of the first spouse, the deceased spouse's trust becomes irrevocable, making the assets in the deceased spouse's trust more difficult to access by potential creditors while also allowing the surviving spouse access to the now irrevocable trust for certain needs. Generally, a surviving spouse can expect to receive income from the irrevocable trust for the rest of their life, and may be able to access trust funds for their Health, Education, Maintenance, and Support. One caution is that, the more control that a surviving spouse has over the deceased spouse's irrevocable trust results in a higher likelihood that a creditor may be able to access the funds. This can help to ensure that creditors do not end up having access to a family farm or ranch in the event that your surviving spouse ends up going though hard times. The United States of America is often considered the most sue-happy country in the world, and there is no telling what your surviving spouse may be sued for after your death.
2. Separate Revocable Living Trusts Can Help Provide For Children From A Prior Marriage.
Unfortunately, divorce is common today, and many people end up re-marrying after a divorce, which often results in blended families where one spouse is the biological parent to children and the other spouse is a step-parent. In a blended family situation, Separate Revocable Living Trusts can help to ensure that a surviving spouse is provided for during life, while also ensuring that the children in a blended family will eventually receive the funds.
To put it simply, Joint Revocable Living Trusts don't work well if the spouses have different ideas about how money and property will be handled at the death of the first spouse. Say, for example, you and your spouse have spent 10-20 years operating a family farm and you have a few children. Something tragic happens, and your spouse passes away. Eventually, you end up getting re-married to a new spouse who also has a few children from a prior marriage. When you do the necessary Estate Planning for your new blended family, you will likely want to ensure that your new spouse is well cared for when you pass away, but you might also want to ensure that your biological children are still able to inherit the family farm that you and your first spouse built. Using Separate Revocable Living Trusts in this kind of a situation will allow you to make sure that your new spouse is cared for, while also making sure that the family farm stays with your biological children. If, in the alternative, everything were left outright to your new spouse once you pass, the surviving spouse could then do whatever he or she wanted with the family farm, which may well not line up with your goals.
3. Separate Revocable Living Trusts Can Allow ForSimpler Administration After A Spouse Dies.
Separate Revocable Living Trusts can allow spouses to designate how they want the assets in their Separate Trust distributed upon their death, with each spouse specifying who will inherit and what is left to the surviving spouse. This means that you would have the Peace of Mind knowing that, when you pass away, your wishes will be honored. I'm not trying to imply that there is any reason to think that your spouse would not honor your wishes after you pass; as noted above, a new marriage can result in unintended consequences simply due to poor estate planning and it is best to plan accordingly.
4. Separate Revocable Living Trusts May Be Beneficial To Help Protect A Spouse's Inheritance Or When There Is A Pre or Post Nuptial Agreement.
If an individual is expecting to receive an inheritance that they wish to keep separate, or if a married couple has executed a Pre or Post Nuptial agreement, Separate Revocable Living Trusts can be of great benefit to keep assets separate, which may make the process simpler in the event that a married couple ends up getting divorced. If your parents passed down a family farm or ranch to you after their deaths, whether you are getting married for the first time, or for the third, it is an excellent idea for your to place your inherited property in your own Separate Revocable Living Trust to ensure that, if you end up getting divorced, your divorced spouse will have little success trying to claim that the property in your separate trust is considered marital property.
5. Separate Revocable Living Trusts Can Help Farmers And Ranchers Save Significant Taxes
In Nebraska, farming and ranching are very common professions. It is not abnormal for a husband to run the farm or ranch while the wife manages the household. Statistically speaking, if a husband and wife are near the same age, it is more likely that the wife will outlive the husband. If the husband, who has been handling the farming or ranching all his life, dies before his wife, and the wife is unable to continue the farming operation, Separate Revocable Living Trusts can be of extreme value in this type of a situation, if set up correctly.
In this type of scenario, it may be advisable for the married couple to place all farm equipment, livestock, and farm ground in the husband's Separate Revocable Living Trust. If this is done, when the husband passes away, all of the farm equipment, livestock, and farm ground can be transferred to the surviving spouse's trust, which will receive a full step-up in tax basis and can allow for the surviving spouse to proceed with a tax-free farm or ranch sale if she is not otherwise able to continue with the farming or ranching operation.
Joint Revocable Living Trusts and Separate Revocable Living Trusts both have their advantages
and disadvantages. A married couple's particular situation should always be reviewed in order to best determine which type of planning is best suited to their needs, and a tailored plan should be prepared to achieve the clients' goals.
Take steps to give yourself, and your family, Peace of Mind today. Contact Clinch Law Firm, LLC to schedule a consultation at our York, Nebraska office, or feel free to schedule a complimentary 30-minute telephone consultation or a 60-minute in-person consultation for a time that works for you here: Appointment Scheduler. Virtual appointments are also available, upon request.