Joint Revocable Living Trust Help Guide

Below, you will find a detailed description of each of the main sections of our living trust in the order that they appear in the document. Note that some of these sections may be omitted from the document depending on how you answer the relevant questions.


Introductory Language

The first section identifies the grantors and, if applicable, it states that the grantors will also act as the initial trustees.

Trust Name

This section identifies the official name of the trust. Use this name when referring to the trust in other documents and when transferring assets to the trust.

Purpose

Next, this section explains that the general trust's purpose is to receive and manage assets during the grantors’ lifetimes and to distribute those assets according to the grantors’ wishes upon death. Carrying out the grantors’ wishes is the primary purpose of the trust, and all successor trustees must act accordingly when managing the trust.

Funding of Trust

The grantors will fund the trust by transferring assets to the trust at the time of creating it or any time thereafter.

Character of Trust Property

Any property put into the trust will retain its original character as either separately or jointly held property, and if the trust is revoked, the trustee will return all property to its respective owner or owners.

Amendment and Revocation

The grantors can change or terminate the trust at any time during their joint lifetime. If, upon the first death of a grantor, you choose to transfer property to the surviving grantor, then the surviving grantor will retain the right to change or terminate the trust during his or her lifetime. However, if you choose not to transfer property to the surviving grantor, then the deceased grantor’s property will be transferred to a separate trust and will become irrevocable.

Trustees

This section identifies the initial trustees and any successor trustees appointed by the grantors to manage the trust. A trustee may resign by providing 30 days’ notice to the next successor trustee.

The grantors may remove an appointed trustee at any time during the grantors’ lives by notifying that trustee, and the grantors may appoint additional or replacement trustees at any time.

Bond

This section explains whether or not the trustees are required to post a bond. A bond is insurance to protect the trust in the event that the trustee acts dishonestly or imprudently with trust property. Payment for the bond is usually a small fee relative to the size of the trust and comes out of the trust property.

If the grantors only want specific appointed trustees to serve with a bond, then you can manually add this language by downloading and changing the Word document version of your completed trust from our site.

Compensation

If an appointed trustee is an individual, then he or she is not entitled to compensation for acting as the trustee under the terms of this section. However, if a trustee is a professional trustee service or business entity, then the trustee will be entitled to the customary and reasonable compensation in rendering such services.

Liability of Trustee

The trustees will not be liable for any improper actions taken so long as those actions are taken in good faith when carrying out their duties.

Trustee's Management Powers and Duties

When transacting business on behalf of the trust, a trustee may use the following format when identifying the trust: John Doe, as Trustee of The [Grantor’s name] and [Grantor’s name] Joint [Spousal] Revocable Living Trust, dated month day, year. Trustees have all rights and powers available under state law to carry out the grantors’ wishes, including, but not limited to, the following:

  • The power to sell trust property, to borrow money, and to encumber trust property, including trust real estate, by mortgage, deed of trust, or other method.
  • The power to manage trust real estate.
  • The power to invest trust property in every kind of property and every kind of investment.
  • The power to receive additional property from any source and to administer such additional property as a portion of the appropriate trust.
  • The power to employ and pay reasonable fees to accountants, lawyers, or investment experts for information or advice relating to the trust.
  • The power to employ and compensate other persons deemed by the trustee as advisable or necessary in the administration of the trust.
  • The power to deposit and hold trust funds in both interest-bearing and non-interest-bearing accounts.
  • The power to continue any business of the grantors.
  • The power to vote shares of stock owned by any trust created hereunder at shareholders' meetings in person or by special, limited, or general proxy, with or without power of substitution.
  • The power to institute or defend legal actions concerning this trust or the grantors' affairs.
  • The power to carry such insurance coverage for trust property as the trustee may deem advisable.
  • The power to execute any documents necessary to administer the trust.
  • The power to perform all other acts necessary for the proper management, investment, and distribution of the trust property.

Note, however, that a trustee may ONLY use such powers if they help to carry out the grantors’ wishes.

Accounting

After both grantors’ deaths, the trustee is required to provide semi-annual accounting to adult beneficiaries detailing relevant transactions and dealings of the trust funds.

Distributions during the Joint Lives of the Grantors

The trustee or trustees serving while both grantors are living will distribute annually as much trust property as is necessary for the reasonable support, maintenance, and comfort of the grantors. The grantors may change the amount of annual disbursements at any time.

Incapacity of Grantors

If the grantors are also the initial trustees and one grantor becomes incapacitated, then the other grantor will remain as sole trustee. Should both grantors become incapacitated, then the next successor trustee will serve. Here, the term "incapacitated" means the inability to make informed decisions because of advanced age, illness, or other causes.

Basically, each grantor needs to have this minimum level of understanding in order to act as trustee. If a grantor is able to regain capacity at a later time, then that grantor’s status as trustee will return.

The incapacitated grantor’s healthcare agent under the healthcare power of attorney will make the decision as to whether the grantor is incapacitated, along with a concurring opinion of at least one physician. If no healthcare agent is available, then the person you name in this section will make this decision.

Death of the First Grantor

The language in your document will depend on what you choose to happen upon the first death of a grantor. If you indicate the deceased grantor’s property will transfer to the surviving grantor, then your document will reflect that the surviving grantor will retain the right to change or revoke the trust at any time.

If you choose not to select this option, then upon the first death of a grantor the trustee will divide all trust property into two separate trusts, and the deceased grantor’s trust will become irrevocable. This will prevent the surviving grantor from altering the deceased grantor’s trust.

By law, when a grantor dies, the trustee will first need to pay all legally enforceable debts, expenses, and taxes owed by that grantor before trust assets may be distributed to beneficiaries.

Distribution of Specific Gifts

The next section lists any specific gifts from the trust property that the grantors want to be distributed upon their deaths. If you choose for all trust property to be transferred to the surviving grantor, then these gifts will be distributed upon the surviving grantor’s death. If you do not choose this option, then this section identifies the gifts that each grantor wants distributed upon his or her death. 

Each gift will name a beneficiary to receive it. If you name co-beneficiaries, then they will divide the property equally. Also, this section names alternative beneficiaries to receive the gift in case the first-choice beneficiaries do not outlive the grantors giving the gift. These assets are also listed under the general trust property.

Distribution of Residuary Living Trust Assets

This important section names the beneficiary that will receive any remaining trust property after any and all specific gifts and child trust funds are accounted for. If you do not want all trust property to be transferred to the surviving grantor, then each grantor’s separate trust will name its own beneficiaries to receive residuary trust assets.

Think of this as a catch-all clause that tells the trustee what to do with any leftover property. Typically, residuary trust property is left to the grantor’s spouse and then any children as alternative co-beneficiaries. Other common beneficiaries include close family and friends or favorite charities.

Children's Subtrust

If you choose the option to include trust funds specifically for the grantors’ children, then this section details the terms of such trust funds. First, this section identifies the children who are eligible to receive trust funds. You may name any biological or adopted children that the grantors have either together or separately. If you choose the relevant option, any after-born or after-adopted children will also be included. The property set aside for the children is identified on the schedule titled “Child Subtrust Property” attached at the end of the document.

After the grantors’ deaths, the trustee will maintain the funds and make periodic disbursements to the children as the trustee considers appropriate for their care, protection, health, education, maintenance, and support, taking into account their accustomed manner of living.

If applicable, this section also specifies the age that each child will stop receiving payments. In this case, the child will receive the rest of his or her equal share upon reaching the specified age. If this is not required, then the children will continue to receive payments until the trust fund is completely diminished.

If a child dies before receiving his or her full share, then that child’s share will go to his or her living descendants; if no descendants exist, then the share will go to the grantors’ living descendants.

Note that before a grantor’s death, the grantor may still use trust funds to support the children since the grantor still has control over the trust.

Terms of Property Distribution

Each beneficiary you name in the document is required to survive the relevant grantor or grantors by at least 30 days in order to receive property under the trust. If there is no surviving beneficiary to receive a gift, that gift will go to the beneficiary’s lineal descendants.

Payment to Minors or Incompetents

As to any minor beneficiaries under the trust—including the grantors’ children, if any—the trustee has discretion as to whether or not to make payments directly to the minor, to make payments to the minor’s legal guardian or caretaker, or to withhold payments and invest the funds until the child is no longer a minor.

Pet Care

If you choose to include this option, this section identifies a caregiver to receive and care for the grantors’ pets upon the grantors’ deaths. It also names an alternative caregiver in case the first is unable to serve. You also have the option to provide trust funds for the caregiver to use in supporting the pets. Lastly, this section identifies the pets involved and provides any other instructions you choose to include.

Priority of Distributions

If the value of the remaining trust property is insufficient to fund a gift, then the trustee will have absolute authority to determine which of the remaining gifts listed under the trust will be distributed. However, remember that the trustee must always seek to carry out the grantors’ wishes; therefore, the trustee will take any known preferences of the grantors into account when making this determination.

Intentional Omissions

If you choose to include this option, then this section identifies any specific persons who are intentionally not named as beneficiaries to receive anything under the trust. It is important to list any people that may try to make a claim against the grantors’ property to whom the grantors specifically do not want to give anything. Common candidates are estranged family members and ex-spouses.

Liquidation of Trust

If the value of the trust property becomes diminished to the point that only insignificant sums of money remain, then the trustee has the power to distribute all the remaining funds. This helps avoid any ongoing fees against the trust property.

Merging of Similar Trusts

This language helps to avoid duplicate fees against the trust that may occur in the event that two separate trust funds end up benefiting the same beneficiary. In such a scenario, the trustee is authorized to merge the separate funds together to make it simpler to administer the trust property.

Severance of Trusts

Just as the trustee may merge two trusts together, the trustee also has the power to split one trust into two separate trusts. In this case, the trustee may split a trust if, under the circumstances, the trustee deems it advisable. For instance, this could occur if one co-beneficiary of a trust becomes disabled and it would be easier for the trustee to create a separate special needs trust for that beneficiary.

Powers Concerning Insurance Policies

Each grantor reserves the right to sell, assign, or gift insurance policies he or she holds under the trust in any manner that they wish, even if such actions contradict the terms of this trust. The trustee will use his or her best efforts to collect any sums due under an insurance policy, but will not be required to institute legal proceedings to collect such sums unless the trustee is indemnified against liability.

Spendthrift Provision

This provision prevents creditors from making a claim against a gift before that gift is actually distributed to its beneficiary.

Gifts Given to a Beneficiary during Grantors' Lifetimes

A gift that is given to a beneficiary during the grantors’ lifetimes that is the same as a gift going to the beneficiary under the trust will satisfy the terms of the trust, and, therefore, that beneficiary will not receive the same gift twice.

Grantors' Rights to Homestead Tax Exemption

If either or both of the grantors’ main residences are held in the trust, then the grantors still have the right to occupy and use the residence rent free during their lifetimes. This right helps ensure that the grantors will not lose eligibility for any state homestead tax exemptions that they may qualify for.

Fiduciary Conflicts of Interest

A trustee with a conflict of interest may still transact business with the trust and continue serving as trustee so long as the trustee acts in good faith, with reasonable care, and on terms comparable to those that may be obtained from third parties when transacting business related to the trust.

Notice of Events

The trustee will not be responsible for good faith errors made when making distributions to beneficiaries who no longer have the right to receive such distributions due to a change in circumstances for which the trustee does not receive notice—for example, a death, birth, marriage, or similar event. However, the trustee will still have to try to recover any such improper distributions.

Change of Situs

The trustee may choose to move the trust to a new jurisdiction at any time. For instance, the trustee may move the trust to a different state, and that state’s laws will then govern the trust. This power may be exercised multiple times and will be final and binding on all individuals and entities involved.

Liability for Acts of Predecessors

Trustees may not be held responsible for any improper actions taken by a prior trustee.

Certificate of Trust

A trustee may sign a certificate or abstract of trust before a notary public containing information describing aspects of this trust, and the certificate or abstract will serve as conclusive evidence of the facts it contains. Third parties transacting with the trust may therefore rely on such certificates or abstracts as accurate representations of trust information.

Governing Law

This section identifies the state law currently governing the trust.

Certification of Grantors

Here, the grantors sign and date where indicated to confirm that they have read the trust and approved of its terms.

Notary Acknowledgment

Although not required, it is recommended that a notary also witnesses the signing, which will help prove the authenticity of the trust should it ever be challenged in court.

Schedules

Jointly Held Trust Property

This schedule lists all jointly held assets that the grantors are transferring into the trust. Jointly held assets are those owned by both grantors. For married grantors in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), all property acquired by either spouse during the marriage is automatically deemed jointly held property. In all states, however, assets acquired using the grantors’ joint funds or that have both grantors’ names listed on the title or ownership document are considered joint property.

Upon signing, the grantors will need to transfer the title of many of these assets into the name of the trust. The manner for changing the owner listed on an asset title or registration will depend on the type of asset. For instance, contact the banks holding your cash accounts for information on transferring those accounts. You will likely need to file a quit claim deed to transfer any real estate. If in doubt, contact the organization responsible for maintaining title or registration records for each asset.

For assets that do not have official title or registration documents, such as jewelry, art, hobby collections, and other personal items, then simply identifying the property here in your trust will suffice to transfer the property into the trust. However, to ensure that those physical items do not get lost, consider placing those items into a safe deposit box owned by the trust. If you do, be sure to let the trustees know where those items are being held and make a record of the relevant information.

Separately Held Trust Property

The following two schedules list all the separately held assets each grantor is transferring into the trust. Separately held property is any property owned by only one of the grantors and which is not considered joint property (see above).

Child Subtrust Property

This schedule lists all of the assets that the grantors are transferring into the child trust fund. These assets are also listed under one of the prior schedules in order to identify the grantor or grantors owning the property.

Supplementary Legal Documents and Forms

Certificate of Trust

As previously mentioned, the trust authorizes trustees to create and sign a certificate of trust, also known as an abstract of trust. The purpose of a certificate of trust is to prove the existence of a trust without disclosing the private details of a trust. Most states have enacted laws that govern the use of certificates of trust, requiring third-party organizations to accept a certificate as long as it complies with state requirements.

Although there may be some slight variations depending upon state law, a certificate of trust normally comprises the following sections:

  • Name and date of the creation of the trust
  • Names of the grantors of the trust
  • Names and addresses of current and successor trustees
  • A list of the trustees’ powers. This is normally an exact copy of the language used in the actual trust.
  • A declaration stating that the trust is revocable and who has the power to revoke the trust
  • A declaration as to how many trustees are required to exercise the powers of the trust
  • The trust’s tax ID number. This may be either the grantors' Social Security Number or a separate Employer Identification Number if one has been applied for.
  • A statement as to how trust assets should be titled

It is best practice that all trustees sign the certificate of trust and that the document is notarized.

Notice of Assignment

A notice of assignment is used to officially evidence the transfer of property from a grantor to a trust. Each grantor should complete their own notice. Some property, such as cars, houses, or shares, have titles that can be changed to show new ownership; however, other items, such as art, jewelry, or antiques, do not, even though their value can be high. The use of a notice of assignment officially witnesses the transfer of untitled property to avoid doubt and lower the possibility of any future conflict. A notice of assignment is not required in every state; however, it is advisable to complete the notice. The document should list all the property being added to the trust and should be signed and notarized. In the event that any untitled property is added to the trust at a later date, a new notice of assignment should be made for that property.

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