[WSBAPT] Joint Trust v. Separate Trusts for WA US Citizen and Non-US Citizen Spouses

[Thomas Hackett]

Hey Colleagues-

Interested to get your perspectives in the following situation. We are having a good dialogue with another planning professional on whether to use a joint trust or separate trusts in the following situation:

  *   Married couple with one US citizen and the other a resident alien non-citizen (Canadian citizen).
  *   30+ years living in Washington and all assets accumulated as Washington residents.
  *   General plan is to provide for each other first and then for descendants.
  *   Assets exceed 2x Washington exemption ($4.5+ million), and so will be using a credit trust at first death along with marital deduction trust with QDOT provisions whether joint or separate trusts.

The concern expressed is whether there will be an issue with the tracing of property at the death of the US citizen spouse with the non-US citizen spouse in having a joint trust. I don’t believe this will be an issue, though curious if others have experienced any issues or have thoughts on this. Again, all assets were acquired by the couple as Washington residents while married.

I think using separate trusts would not be as beneficial because in doing so we would designated each spouse’s trust as owning separate and not community property – or else we’d essentially have two joint trusts. And then by having separate property for each spouse, we would miss out on the basis adjustment to fair market value of all the community property at the first spouse’s death.

In my research on Bloomberg and the Washington Community Property Deskbook, I did not find any authority that addresses this with the non-US citizen spouse. That said, I think the Washington DOR or IRS would have a tough time arguing that the non-US citizen spouse did not contribute equally to the creating of the community property, but I can see how the taxing authority could take a different position.

Appreciate in advance for sharing your insights and thoughts on this.

[uc%3fexport=download&id=1yZcGlfhsBgENylLMu3egnITqpL_Rjqw3&revid=0B7QFhV8A7-WsWG41Rm5VbnB0SVFjbXp2NUZPaCtDOUhaZFY0PQ]
 Thomas A. Hackett
 Attorney
 nwlegacylaw.com<http://nwlegacylaw.com> | 360-975-7770



-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20220401/74c95786/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.png
Type: image/png
Size: 5944 bytes
Desc: image001.png
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20220401/74c95786/image001.png>