Spousal Trusts Can Benefit Your Family
Nearly half of marriages in this country end up in a divorce, and this presents challenges in the area of estate planning. Equally as difficult are situations where the spouse remarries later in life with significant assets and a blended family. One estate planning tool that could help keep the tension between the families to a minimum is the spousal trust.
Why You May Need a Spousal Trust
When you get remarried, you’ll likely want to take care of your new spouse even after you’re gone. On the flip side, your children may be worried about where this leaves them in the scheme of things when it comes to the will. They may be counting on an inheritance, and they may fear getting cut out if the new spouse stands to inherit your assets after you pass. Thus, there is a need to provide for the spouse as well as reassure the children that they, too, will receive their share of your assets. The spousal trust aims to make sure that both happen.
It used to be that a spousal trust was more of a means to manage estate taxes. Now, it is a fitting tool to help manage blended family situations. It can even be useful when you are getting married for the first time.
How a Spousal Trust Works
The great part about spousal trusts is that they can be flexible to fit your particular family situation. An estate planning lawyer may advise you as to the exact right structure that will be the most beneficial.
The usual way that these trusts operate is as follows: Upon the passing of the trust grantor, the assets will go into a special trust that is set up to provide for and maintain the surviving spouse. The trust must be for the benefit of the spouse and the spouse alone. This means that nobody else can receive income from the trust so long as the surviving spouse is alive. This provides protection for the children of the grantor who may worry that the spouse can divert assets to their own family.
Generally, the surviving spouse will be appointed as the trustee of the fund and manage the assets. However, there is the flexibility to appoint a different trustee if there are concerns about that spouse’s ability to manage the money. Nevertheless, you should be sensitive to the situation in deciding who you would appoint to this crucial position.
The trust lasts so long as the surviving spouse is alive. There are beneficiaries to the trust appointed at the creation so that they will receive the assets once the surviving spouse passes. In other words, when that happens, the trust concludes, and the assets are distributed.
Some Special Conditions That May Help
Even with the trust, some children may worry that the surviving spouse may deplete the assets while they are still alive and, as a result, there will be nothing left for the children. The good news is that a trust gives you many options. For example, you could apply a restriction on how the funds will be spent by the surviving spouse. There can also be a preservation of capital restrictions dictating that the money is spent only to maintain the surviving spouse’s quality of life and nothing else.
If you are getting remarried and you have assets, it is vital that you have a discussion with your future spouse ahead of time and not be afraid to raise the issue. Then, you should visit an estate planning lawyer to figure out how to merge and blend the two estate plans in a way that will provide for the spouses and preserve assets for the children.
Call the Knee Law Firm in Hackensack, NJ, at (201) 996-1200 to set up a consultation with an estate planning lawyer. Our legal team, which has more than 60 years of combined experience, could help you develop an estate planning approach that will best meet your needs.