I received an email from an attorney seeking my opinion on a joint revocable trust for the benefit of a husband and wife as tenants by entireties under Florida law. The issue is whether a couple can enjoy the asset protection of tenants by entireties within the framework of a joint revocable trust prepared for estate planning purposes.
I am not aware of any Florida court decisions on whether husband and wife can own beneficial interest in trust T by E. On one hand, the Florida Supreme Court said in the Beal Bank decision that all property owned jointly by husband and wife is presumed to be owned T by E, and the beneficial interest in a trust is a type of intangible personal property. What has always troubled me was the provisions in most joint living trusts which create separate and distinct shares for a husband and wife.
There are several purposes for the separate and distinct shares in tax planning. The typical trust agreement says that property which is joint when contributed to the living trust is deemed owned half by wife’s share and half by husband’s share. Separate trust shares in a joint trust would undermine T by E. I assume that a T by E trust attempts to avoid that joint trust language or override it. I haven’t seen a joint trust that can guarantee both TE protection and the estate tax advantages of separate shares; although, I have seen some forms which attempt to do that and maybe some work.
It would be nice if someone with a small estate and creditor problems was willing to gamble on a T by E living trust and take any adverse decision to court so that there hopefully would be a favorable court ruling. I would not recommend that anyone with significant asset protection risk gamble their wealth on a joint T. by E. trust just because it might work in theory. I want to see someone else establish court precedent first. Asset protection is often at odds with good estate tax planning, and the client has to chose their priority and plan accordingly.
Last updated on May 22, 2020