Should Married Couples Have Separate Trusts in Virginia?
Starting an estate plan is a significant step for a married couple, and it often comes with a mix of relief and difficult choices.
At Commonwealth Life & Legacy Counsel, husband-and-wife attorneys Michael Winget-Hernandez and Lelia Winget-Hernandez help Central Virginia families with estate planning, trusts, and elder law.
This article explains how joint and separate revocable trusts differ and which structure may fit a married couple’s property, family, and planning goals.
What Is the Difference Between Joint and Separate Trusts?
Both structures may be revocable during life, allowing the person who created the trust to retain control. However, they organize ownership and management in different ways.
Joint Revocable Living Trusts Overview
A joint trust places some or all of a couple’s assets into one shared trust. Both spouses are typically co-trustees, although their exact powers depend on the terms of the document.
This arrangement allows both spouses to use and manage trust property during their lifetimes. It may also allow the trust to continue for the surviving spouse after the first death, depending on how the plan is written.
Separate Revocable Living Trusts Overview
With separate trusts, each spouse creates an individual trust and transfers separately owned assets into it. A spouse may also transfer an interest in jointly owned property when doing so is consistent with the couple’s plan and the applicable ownership rules.
Each spouse commonly manages their own trust and may name the other spouse or another person to serve if they become unable to act.
Under Virginia law, a trust is generally revocable unless its terms expressly state that it is irrevocable, subject to an exception for certain trusts created before July 1, 2006. Va. Code § 64.2-751.
Reasons to Consider a Joint Trust in Virginia
A joint trust may work well for spouses who treat most of their property as shared and have similar inheritance goals.
Simplicity and Ease of Administration During Life
Funding one joint trust may require fewer separate accounts, deeds, schedules, and records than maintaining two individual trusts.
While both spouses are alive, a properly structured revocable trust is commonly treated as a grantor trust for federal income-tax purposes. The income attributable to a grantor-owned portion is generally reported by the person treated as its owner. The exact reporting method depends on the trust terms, the source of the assets, and each spouse’s retained rights.
Preserving Tenancy-by-the-Entirety Protection
Virginia allows married spouses to own real or personal property as tenants by the entirety. This form of ownership may protect the property against claims based only on one spouse’s separate debt.
Qualifying tenancy-by-the-entirety property may retain that protection when transferred either to the spouses’ joint trust or to their separate trusts. The statutory requirements must remain satisfied, including that the spouses remain married and retain the required interests in the trust property. Va. Code § 55.1-136(C).
The deed and trust terms must be coordinated carefully. Moving jointly owned property into a trust does not automatically preserve tenancy-by-the-entirety protection.
Potential Basis Considerations at Death
Federal tax basis may change when property is included in a deceased spouse’s estate. Whether all or only part of a trust asset receives an adjusted basis depends on ownership, the source of the property, the trust terms, estate-inclusion rules, and other federal tax provisions.
Some plans use powers of appointment or other provisions that may affect estate inclusion and basis. Those provisions can also create tax and control consequences, so they require individualized tax review rather than being treated as an automatic benefit of a joint trust.
A joint trust may be worth considering for couples who value:
- Simpler administration during life
- Shared control of trust property
- One primary set of trust records
- Similar beneficiaries and inheritance goals
- Coordinated treatment of jointly owned assets
Advantages of Using Separate Trusts
Virginia is not a community-property state. Separate trusts may therefore be useful when spouses want to maintain clearer distinctions between their assets or inheritance plans.
Clear Ownership of Separate Property
Each spouse can use an individual trust for property owned before marriage, inherited property, gifts received individually, or other separately held assets.
Separate trusts may also help coordinate:
- Premarital or marital agreements
- Family property intended to remain on one spouse’s side
- Different beneficiaries
- Business interests
- Children from previous relationships
The distinction remains clearest when deeds, account registrations, trust schedules, and other ownership records are kept current.
Separation of Creditor Exposure
Separate trusts may help preserve a distinction between each spouse’s individually owned property. However, a revocable trust is generally not an asset-protection trust for the spouse who created it.
During a settlor’s lifetime, property in that settlor’s revocable trust remains subject to claims by the settlor’s creditors. Va. Code § 64.2-747.
Property owned solely by the other spouse is not automatically responsible for the first spouse’s separate debt, although joint obligations, guarantees, fraudulent-transfer rules, and other circumstances may affect the result.
Qualifying tenancy-by-the-entirety property may retain its statutory protection in either joint or separate trusts when the requirements of Va. Code § 55.1-136(C) is satisfied.
Clearer Asset Tracing After Death
A joint trust can make it harder to identify which spouse contributed particular property if records have not been maintained. Years of deposits, withdrawals, and transfers may blur the ownership history.
Separate trusts can provide a clearer record of who owned each asset. That may simplify administration and tax reporting after the first spouse dies.
Joint and Separate Trusts Compared
| Factor | Joint Trust | Separate Trusts |
| Funding process | One trust to fund, often with fewer separate records | Two trusts to fund, with ownership maintained separately |
| Control during life | Usually shared, subject to the trust terms | Each spouse generally controls their own revocable trust |
| Creditor considerations | Revocable trust property remains subject to the relevant settlor’s creditors, subject to applicable tenancy-by-the-entirety protection | Each trust remains subject to its settlor’s creditors, while qualifying tenancy-by-the-entirety protection may still be preserved |
| Tenancy by the entirety | May be preserved if Va. Code § 55.1-136(C) is satisfied | May also be preserved if Va. Code § 55.1-136(C) is satisfied |
| Basis considerations | Depend on ownership, trust terms, and federal estate-inclusion rules | Usually tied more clearly to the property associated with the deceased spouse |
| Tax filing after the first death | Depends on whether and how the trust divides | The deceased spouse’s trust may become a separate irrevocable trust |
| Asset tracing | May be harder if assets and contributions are commingled | Generally clearer when records are maintained |
| Blended-family planning | Can work with carefully drafted separate shares | May provide clearer control over each spouse’s beneficiaries |
Both structures can work, but they address different concerns. The appropriate choice depends on the couple’s property, liabilities, family relationships, tax circumstances, and willingness to maintain separate records.
Remarriage Protection and Blended-Family Benefits
Separate trusts may be helpful when one or both spouses have children from a prior relationship.
For example, one spouse’s trust may provide support for the surviving spouse during life and then direct the remaining property to the first spouse’s children. Whether those provisions become irrevocable at the first death depends on the trust’s terms.
A joint trust can also address blended-family concerns by dividing into separate shares after the first death or limiting the surviving spouse’s ability to change certain beneficiaries.
The document must balance support for the surviving spouse with the first spouse’s intended inheritance plan.
Important Income-Tax Considerations
When one spouse dies, a separate trust or part of a joint trust may become irrevocable. Depending on its tax status and income, it may need an employer identification number and a federal fiduciary income-tax return.
Form 1041 is used for domestic estates and trusts when the applicable filing requirements are met.
Tax considerations may include:
- Basis adjustments after the first death
- Whether a trust remains a grantor trust
- Whether trust income is retained or distributed
- The tax brackets applicable to an irrevocable trust
- Beneficiary designations on retirement accounts
- Estate inclusion caused by retained rights or powers
These consequences depend on the trust language, ownership history, and federal tax law. Tax advantages should not be assumed solely from choosing a joint or separate structure.
How to Choose the Right Trust Structure for Your Family
The decision should reflect how the couple owns property and what they want the plan to accomplish.
Relevant questions include:
- Do both spouses have the same beneficiaries?
- Does either spouse own substantial premarital or inherited property?
- Are there children from previous relationships?
- Does a premarital or marital agreement apply?
- Does either spouse own a business or face significant liability exposure?
- Which assets are held as tenants by the entirety?
- Should the surviving spouse be able to change the ultimate beneficiaries?
- How much separate recordkeeping are the spouses willing to maintain?
- What tax advice is needed before changing ownership or trust terms?
- Who should act as successor trustee?
Some couples use one joint trust. Others use separate trusts, and some use a combination of joint and separate planning.
Choosing a Trust Structure That Fits Your Marriage
Joint and separate trusts can both work for Virginia married couples. The appropriate structure depends on how the spouses own property, whether their inheritance goals align, and how much shared control or separation they want.
At Commonwealth Life and Legacy Counsel, we help married couples coordinate trusts, deeds, beneficiary designations, and related estate-planning documents so that the different parts of the plan work together.
Call our Zions Crossroad office at 434-589-2958 or our Powhatan office at 804-598-1348, email info@winget-hernandez.com, or reach out through our contact page.
Disclaimer: This article is educational only and is not legal advice. Reading it does not create an attorney-client relationship.