A revocable living trust is the most common tool that people use to avoid probate. Avoiding probate is important because your beneficiaries’ private information (name, address, how much money they are getting, etc.) becomes part of a publicly searchable database and can expose them as a target for identity theft, bank hacking, etc.
Married couples have traditionally been offered a joint revocable trust. This is one trust with two grantors. The trust stays in place until both grantors are gone. One joint trust is less expensive than the legal fees for each to have their own trust. However, I stopped offering joint revocable living trusts over four years ago. This is based on my experience that modifying or terminating a joint trust is problematic after one of the grantors has developed dementia and/or after one of them has died. I have attempted to persuade other attorneys to stop offering joint trusts, as well, considering it to border on malpractice, in my view.
There is a new Iowa Supreme Court case that confirms my position. In Little v. Davis, Davis and his second wife had a joint revocable trust. The trust held farmland that was owned by Davis before his second marriage. A revocable trust becomes irrevocable on the death of the grantor. Davis’ wife died.
The beneficiaries of the farmland were Davis’ four children, equally. Davis changed his mind and decided to change the beneficiaries of the trust so that two of the children received a larger share and these two children were trustees (instead of all four). The law allows an irrevocable trust to be changed if all of the grantors and all of the beneficiaries agree. Davis and all four children signed a waiver agreeing to the change, although not all the beneficiaries were actually told what the change was.
Davis died. Little, upon learning that her share had been whacked, filed a lawsuit stating that Davis could not make changes without court approval because the second wife, a grantor, had died and was not able to consent to the changes. Little won. I predict that joint revocable trusts will become antiquated estate planning, similar to joint Last Will and Testaments, which lawyers stopped writing 40 years ago. If you currently have a joint revocable trust, it may be time to consider revoking it in favor of separate trusts before it becomes too late to do that.
