If you are a married professional, including a small business or real estate owner, or if you have creditor concerns of any kind, then you may be interested in a new Missouri law called a Qualified Spousal Trust. This trust offers creditor protection benefits for jointly owned marital assets. The lawyers at Checkett, Pauly, Bay & Morgan explain what a Qualified Spousal Trust is and who can benefit from them.
Tenants by The Entireties Properties
Tenancy by the entireties is the technical term for the joint ownership of property by spouses living in Missouri. Under Missouri law, this jointly owned property is deemed owned by the marital unit—an entity separate from either spouse alone. If one spouse has a judgment against him or her alone, the jointly owned assets are protected.
However, if there is a judgment against both spouses, the jointly owned assets will be liable for the joint marital debt. The IRS is the only creditor whose lien can attach to a spouse’s interest in tenancy by the entireties property.
There are disadvantages to owning property as tenants by the entireties. If both spouses pass away at the same time, then the property will be subject to probate. If one spouse dies, the survivor then owns 100% of the property outright and has no asset protection.
Individual Revocable Trusts
A husband and wife may each create their own separate revocable trust. However, a revocable trust has no asset protection benefits because you can revoke the trust and remove all the assets. Creditors can do the same.
Joint Marital Trusts
Many clients prefer a joint revocable trust. With a joint trust, both spouses create the trust and transfer assets to the trust. Typically, this joint trust serves as the primary estate planning document for many couples. Under prior Missouri law, it was unclear if joint trusts retained the asset protection benefits of tenancy by the entireties property.
What Is a Qualified Spousal Trust?
The Missouri Legislature passed a new law providing that if tenancy by the entireties property is transferred to a Qualified Spousal Trust, then the trust property will have the same immunity from the claims of the separate creditors that existed if the spouses had continued to hold the property as tenants by the entireties. However, there are very exact and specific requirements to creating and enforcing a Qualified Spousal Trust, or the protection is lost.
Is a Qualified Spousal Trust for You?
A Qualified Spousal Trust can provide the best of all worlds. Your assets will be protected from your individual creditors, you will avoid probate, and you can provide for estate tax planning at the same time. If you have creditor protection concerns, you should consider a Qualified Spousal Trust. This may entail an update of your entire estate plan, but the potential benefits can be enormous.
Related Post: What is a Revocable Trust in Missouri? Our Estate Planning Attorneys Explain
Call Checkett, Pauly, Bay & Morgan in Carthage, Mo
The lawyers at Checkett, Pauly, Bay & Morgan can answer your additional questions about asset protection and Qualified Spousal Trusts in Missouri. Contact us today online or by calling.
