How Else Can I Use a Living Trust to Plan for My Spouse?

Share this post

Living trusts can be used to plan for a spouse’s well-being in a variety of ways. During any period that you are disabled, the trust language may authorize the successor trustee—who will often be the surviving spouse either serving alone or serving with a co-trustee—to provide for the spouse’s needs out of the trust assets. Upon your death, the trust may specify that the trust assets are to be funded into one or more new “subtrusts” that may include the surviving spouse as a beneficiary. These subtrusts are often used for estate tax planning, to protect the spouse and other beneficiaries from creditors, and to provide you with some control of the assets after your death.

Typically a portion of your living trust assets equal to the Federal estate tax exemption would be transferred to a “Family Trust.” This is usually designed so that the surviving spouse, children, or other descendants are beneficiaries of the principal and income. Your trust assets in “excess” of the Federal estate tax exemption would be funded into a “Marital Trust” that by its terms must distribute its income to your surviving spouse.

You have the option to authorize the Marital Trust trustee to make distributions of principal from the Marital Trust to the surviving spouse. Upon the surviving spouse’s death, the assets remaining in the Family Trust—including any growth of those assets—will pass to your children or other beneficiaries free of Federal estate tax. Assets in the Marital Trust will be included in the surviving spouse’s estate for estate tax purposes. Any portion of the Marital Trust assets not needed for payment of taxes will be available to pass to the next generation.