Understanding Marital Trusts in Your Estate Plan

A marital trust is a complex estate planning tool that should be crafted carefully. Because of its tax benefits, you should work closely with an experienced estate planning attorney to establish the marital trust properly.
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Written by:Tim J. Wooten

Attorney at Law

Tim has 20 years of practice experience and has wide experience with federal and state courts throughout the country in insurance coverage, insurance defense, complex litigation, construction and design, product liability, breach of contract, federal tax controversy and disputes before the IRS and U.S. Tax Court, settlements and probate, and multi-jurisdictional litigation.
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Married couples looking to secure their financial future and provide for the surviving spouse tax-efficiently may consider a marital trust.  This article will explore various aspects of marital trusts, how they work and their role in an effective estate plan.

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What Is a Marital Trust?

A marital trust is a legal arrangement in estate planning used predominantly by married couples. It is designed to provide financial benefits to a surviving spouse and can be a crucial part of an estate plan. Marital trusts ensure that upon the death of one spouse, the surviving spouse receives assets held in the trust. This arrangement not only offers financial security but also involves estate tax considerations.

How Does a Marital Trust Work in an Estate Plan?

In an estate plan, a marital trust comes into play upon the death of the first spouse. It’s created to transfer assets to the surviving spouse in a manner that is often exempt from immediate estate taxes, thanks to the unlimited marital deduction. This mechanism allows the surviving spouse to utilize the trust assets and potentially the income generated by these assets.

What Is the Unlimited Marital Deduction?

The unlimited marital deduction is a key component in how marital trusts operate. It allows for the transfer of an unrestricted amount of assets to the surviving spouse without incurring federal estate tax at the time of the first spouse’s death. This exemption is a significant advantage of using a marital trust in estate planning.

What Types of Marital Trusts Exist?

There are several types of marital trusts, each with specific features and benefits. A commonly used type is the Qualified Terminable Interest Property (QTIP) trust, which allows the first spouse to control how the trust’s assets are distributed after the death of the surviving spouse. Another type is the B Trust or credit shelter trust, which can help maximize estate tax exemption limits.

How can a Marital Trust Benefit a Surviving Spouse?

A marital trust offers numerous benefits to a surviving spouse. It ensures that the spouse can access trust assets and income, providing financial security. The trust can also stipulate how assets are managed and distributed, offering a layer of control and protection over the family’s financial legacy.

What Is the Role of Estate Tax in Marital Trusts?

Estate tax plays a crucial role in the functioning of marital trusts. By utilizing a marital trust, you can defer the federal estate tax until the death of the surviving spouse. This deferral can result in significant tax savings, especially if the estate exceeds the federal estate tax exemption threshold.

What are the Cons of a Marital Trust?

While marital trusts offer many benefits, there are downsides to consider. One such drawback is their irrevocable nature; once established, the terms are generally set and cannot be easily altered. The surviving spouse’s estate may also be subject to increased estate taxes upon their death, depending on the trust’s structure and the value of the assets.

How Do You Establish a Marital Trust?

Establishing a marital trust involves careful planning and legal expertise. It requires drafting a trust document that outlines the terms, beneficiaries and conditions under which the trust operates. Consulting with an estate planning attorney ensures that the trust aligns with your estate plan and tax strategy.

The Different Types of Spousal Trusts

Yes, there are different types of spousal trusts, each designed for specific situations and objectives. Apart from marital trusts, other options include Spousal Lifetime Access Trusts (SLATs) and bypass trusts, each offering unique advantages and serving different estate planning goals.

What Is the Future of Estate Tax and Marital Trusts?

The future of estate tax laws and their impact on marital trusts is uncertain and subject to change based on legislative developments. Staying informed and periodically reviewing your estate plan with an attorney is advisable to ensure that it continues to meet your objectives and complies with current laws.

In conclusion, marital trusts are a versatile and powerful tool in estate planning. They offer financial security for the surviving spouse and tax advantages and can be tailored to suit individual estate planning needs. Contact our law firm if you’re considering incorporating a marital trust into your estate plan or have more questions. Our team is dedicated to guiding you through the process and ensuring that your estate plan reflects your wishes and protects your loved ones.


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