What Is a Marital Trust?

Clients use marital trusts for multiple benefits in their estate plans, including asset allocation, planning for blended families, creditor protection and tax benefits.  If you are married, marital trusts are worth considering in your estate plan.

Forbes’ recent article entitled “Guide To Marital Trusts” says that a marital trust is an irrevocable trust that allows you to transfer a deceased spouse’s assets to the surviving spouse at death in a tax efficient manner.  When the surviving spouse dies, the assets in the trust aren’t necessarily part of their estate. That may keep the taxes on their estate lower.

A marital trust is created by one spouse in their trust or wife, and it holds property for the benefit of the surviving spouse.  The trustee of the marital trust can be the surviving spouse, or another person chosen by the creator.

All of the income of the trust is paid to the spouse during their lifetime.  This basically means if the trust is producing money such as dividends, rent and so on, it pays out to the surviving spouse.  This is often a good way to provide an income stream for the surviving spouse without giving them unfettered access to all of the assets.

At the death of the surviving spouse, the remaining trust property can go to the beneficiaries the first spouse designated.  This is especially helpful in blended families where one spouse wants to provide for their spouse, but wants what remains to go to their children.

The trust may also protect assets from creditors and future spouses that the surviving spouse may encounter. It accomplishes this by keeping the assets within the trust and prevents them from freely being taken out by a creditor or predator.

If keeping wealth within your family after you die is important, then a marital trust is an estate planning tool that may help

Reference: Forbes (June 30, 2022) “Guide To Marital Trusts”

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