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how many trusts should you have

One Trust, Two Trusts, Three Trusts, More?

Is it better to have one trust for all of a couple’s assets (community, husband’s separate and wife’s separate) versus three separate trusts? This is a major structural issue that must be decided before drafting a couple’s estate planning documents can begin. It depends. The answer may depend on the mix of assets and the circumstances of the husband and wife.

  • If the assets are primarily separate, a community trust that divides at first death and distributes to separate trusts may be preferable.
  • If the assets are primarily community, and the separate property can be readily identified, two separate trusts that pour into the appropriate share of central community trust may be preferable.
  • Alternatively, it may be best to fund all assets into a single trust with the caveat that trust ownership is not intended to change the character of assets—but the drafter should beware and ought not risk inadvertent transmutation of property by a mistaken
    characterization and funding into the “wrong” trust.

Sample provision for one trust holding community and separate:

“It is our intention that all community property and all additions thereto remain our community property. No provision in this instrument shall change the character of any community property. It is also our intention that these trust provisions not change our respective separate property or any additions thereto to community property or to the other Settlor’s separate property. We do not intend to transmute the character of any property by reason of the transfer of such property to the Trustee of this trust.”

Sample provision to differentiate property by title:

“The Settlors and Trustee shall use any reasonable means to differentiate the separate and community property ownership of the trust assets. [Absent indication to the contrary, any trust property standing in the name of one of us as Trustee shall be presumed to be the separate property of that one of us, and property standing in the names of both of us as Trustee shall be presumed to be our community property.] However, if any of our respective separate property is held in both of our names as Trustee, it shall not change the character of such separate property, and if title to community property assets of the trust is held in the name of one of us as Trustee, it shall not change the character of such community property.”

When one or both settlors own a significant amount of separate property, the drafter must consider whether it would be preferable to establish a separate trust for separate property. A separate trust is usually desirable if the provisions concerning distributions in the event of incompetence during the settlors’ joint lifetimes are significantly different for separate property than for community property or if a different trustee is desired for separate property during the owner’s incompetence.

A separate trust can also be a useful device for avoiding commingling of separate and community property. A separate trust can be unilaterally amended by the settlor. Further, the owner of separate property may simply feel more comfortable having a separate trust.

If you have any questions about the above information or any other estate planning matters, you may reach me at or 651-631-0616.

Virginia Ryan provides trust, will, probate, and business law services to clients in Maplewood Minnesota, and the surrounding areas of North Oaks, White Bear Lake, Lake Elmo, Grant, Mahtomedi, Dellwood, Woodbury, Oakdale, Roseville, Little Canada, Shoreview, Vadnais Heights, St. Paul, Hugo, Lino Lakes, Stillwater.