A marital trust can be a wise estate planning move for couples.
Thinking about death is unpleasant for anyone.
It can be especially difficult for those who are married.
Sharing life with a partner underscores the loneliness experienced after the death of a spouse.
Despite the uncomfortable nature of estate planning, it is essential to discuss options when providing for loved ones and protecting assets.
According to a recent Forbes article titled “Guide To Marital Trusts,” one tool for married couples to consider is a marital trust.
A marital trust is a type of irrevocable trust.
It is used to transfer the assets from the spouse who dies to the surviving spouse while avoiding the payment of taxes or claims from creditors.
While the surviving spouse is alive, the trust can provide tax-free net income.
Another benefit is the ability to shield the assets from a future spouse should the surviving spouse remarry.
How is a marital trust created?
There must first be a grantor.
The grantor is the person who has the trust set up.
The principal are the assets this person uses to initially fund the trust.
These assets can be money, retirement accounts, investment accounts, or real property.
A trustee must be selected to manage the trust.
Although other trusts allow for more options for beneficiaries, the spouse must be the sole beneficiary of a marital trust.
After the surviving spouse dies, the trust will be passed according to the wishes of the first spouse who died.
This allows a couple to ensure money remains in the family and is a popular estate planning technique for blended families.
Reference: Forbes (June 30, 2022) “Guide To Marital Trusts”