As we build out estate plans for our clients, one thing we put together is a spousal trust. What is a spousal trust? Here’s some high level information on the topic and why it may be so important to you.
What is a Spousal Trust?
As you may expect, a spousal trust is something designed to help take care of your spouse when you pass on. There are several reasons why it’s a critical part of the estate planning process.
Lower estate taxes – if you pass away without a good estate plan in place, your family may end up with a hefty estate taxes fee. Yes, the government always finds a way to get paid taxes – even upon your death.
By implementing the right trusts, your family can have a much lower tax bill, meaning they’re able to hang onto the money you worked so hard to save over your lifetime.
Allocation – setting up a spousal trust helps make sure your assets go into the right hands when you pass on. While it’s typical for assets to go to the surviving spouse, the trust helps make sure it goes smoothly.
Avoid probate court – similar to the allocation piece, setting up a trust will help prevent your family from having to go to probate court. Life is already stressful and sad enough after a family member passes – don’t you want to help them avoid the pain of going to probate court too?
What Types of Marital Trusts are There?
The world of estate planning can be confusing sometimes. There are several different types of trusts out there, and sometimes combinations of trusts will be used together to help families save as much as possible on estate taxes.
For example, you may have heard of a “A/B trust.” This is a strategy where you use two different types of trusts:
- The “B” trust, or bypass trust, is allocated the maximum amount allowed by the law for your family to avoid estate taxes
- The “A” trust, or appointment trust, is allocated the remainder of your assets
When you hear the term “marital trust” you’re probably hearing about the “A” trust. But it’s often used in conjunction with the B trust to maximize tax benefits.
Who Should Get a Spousal Trust?
The short answer is simple: anyone who is married.
- Are you newlyweds without a lot of assets to your name? In that case, don’t you want to make sure your spouse gets the few assets you do have if something happens to you?
- Do you have a young family with little kids? In that case, it’s important to set up the trust so your spouse can keep as much as possible to provide for the family in case something happens.
- Are your kids older and out of the house? In that case your spouse is also older and may want to be retired soon, right? Again, it’s important to save them as much money as possible on estate taxes. That way they’re able to keep your hard-earned assets and be taken-care of.
A spousal trust is an important part of estate planning. Give us a call at 714-663-8000 and we’ll help get yours started.