Should You Have One Revocable Living Trust or Two?

By: Anthony J. Enea, Esq.

One of the issues that commonly arises when engaging in estate planning for a client is whether it is better to utilize a joint Revocable Living Trust or two separate Revocable Living Trusts for a married couple. 

The answer is relatively easy if the couple has a large enough estate that may be subject to the New York Estate Tax upon the death of the second spouse to die. In that event, it would be wise to utilize two Revocable Living Trusts, and to divide the couple’s non-retirement assets between said trusts as evenly as possible. This would allow them to take advantage of the New York Estate Tax exemption of the first spouse to die, and is frequently accomplished by utilizing a Credit Shelter Trust, a Disclaimer Trust, or a QTIP (Qualified Terminable Interest Property) Trust in each of the Revocable Living Trusts that are created.

Because New York’s Estate Tax exemption is $7.16 million per person and does not provide for the portability of the exemption between spouses, if the exemption is not used on the death of the first to die, it will be lost, thus increasing the likelihood that the estate of the second-to-die spouse will be greater than New York’s Estate Tax “Cliff” (i.e., $7,518,000). Thus, if on the date of death of the second spouse to die, their estate is greater than $7,518,000, a New York Estate Tax will be applied. It will be calculated not on the amount over $7,518,000, but rather, on the entire estate going back to Dollar $1. The New York Estate Tax is imposed at a graduating rate, with a cap at a maximum of sixteen percent (16%). For most couples, the Federal Estate & Gift Tax is of little concern, as the exemption will be $15 million per person starting on January 1, 2026, and the exemption is portable between spouses: It is a total amount of $30 million, irrespective of which spouse dies first.

Having two Revocable Living Trusts rather than a joint Revocable Living Trust also avoids the need to move trust assets into the name of one spouse, individually, in the event that the other spouse is ill and needs Medicaid home care or Medicaid nursing home benefits. If two Revocable Living Trusts are in existence, the funds in the Revocable Living Trust of the ill spouse (i.e., the home and non-retirement savings) can be moved into the Revocable Living Trust of the well spouse; and, if need be, that spouse can execute a spousal refusal so that the ill spouse is eligible to receive Medicaid home care or Medicaid nursing home benefits.

Finally, if a creditor has a claim against one spouse only but the couple’s non-retirement assets are titled in the name of a joint Revocable Living Trust, the totality of said trust will be reachable by said spouse’s creditors. See New York Estates, Powers & Trusts Law (EPTL) § 7-3.1(A). Generally, this is a non-issue for seniors engaging in estate planning, however, it is an important point to consider in certain situations. As the creator of each trust (the “Settlor” or “Grantor”) is considered to have beneficial access and control over all of the trust assets, such as the power to revoke or amend the trust, this allows the creditors of either Settlor/Grantor to reach said trust assets. See EPTL § 7-1.9(A).

In conclusion, depending on the individual circumstances of the clients involved (e.g., the nature of their employment and the risks attendant thereto, along with the estate tax and long-term care planning considerations), it may be wise to consider two separate Revocable Living Trusts for a married couple, instead of one joint Revocable Living Trust. For the reasons shown above, the expense of forming the second trust is insignificant when compared to the consequences of failing to do so.

Anthony J. Enea is the managing attorney of Enea, Scanlan and Sirignano, LLP of White Plains, and Somers New York. He focuses his practice on Wills, Trusts, Estates and Elder Law.  Anthony is the Past Chair of the Elder Law and Special Needs Section of the New York State Bar Association (NYSBA) and is the past Chair of the 50+ Section of the NYSBA. He is a Past President and Founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). Anthony is also a Past President of the Westchester County Bar Foundation and a Past President of the Westchester County Bar Association. He is fluent in Italian. He can be reached at (914) 948-1500 or at [email protected].