Marital Trusts

A shared marital trust (aka shared living trust) is a basic type of living trust that can be used by a married couple to provide for the surviving spouse and allows both spouses to avoid probate when transferring their trust property to their beneficiaries. However, if the couple is wealthy, then they may want to use a different type of trust that saves estate taxes, such as the AB trust.

The way the shared marital trust is typically structured is by having the couple put most or all their property into the trust – both jointly owned or community property and separately owned property. The couple serves as cotrustees — hence, either one has complete control over their shared trust property, although banks or other companies may require the signature of both spouses to transfer shared property. However, the consent of both is required to amend the trust, but either one can terminate it. The trust document is usually supplemented with 3 schedules, with a list of:

  1. jointly owned property,
  2. the wife's property,
  3. the husband's property.

Property can be added later by amending the schedules.

With separately owned property, the owning spouse can dispose of it as she could if it were not part of the trust. She can also specify the beneficiary for her property in the trust document.

Typically, the shared marital trust to set up to split into 2 trusts when one spouse dies. The 1st created trust receives the separate property and ½ of the jointly owned property of the deceased spouse that will go to beneficiaries other than the surviving spouse. The 2nd trust consists of all the surviving spouse's property and the property left to her by the deceased spouse. The 1st trust becomes irrevocable — it can't be changed by the surviving spouse, which ensures that the decedent's beneficiaries will receive their gift — but the 2nd trust remains revocable while the surviving spouse lives and she is free to change it or terminate it at any time.

One advantage of the shared marital trust is that the surviving spouse can receive property from the deceased spouse without doing anything since the property will remain in the trust. If the wife and husband had separate trusts, then the surviving spouse must transfer all the property gifted to her by the deceased spouse by changing title records and fulfilling any other requirements to transfer property from one owner to another.

The surviving spouse becomes the sole trustee of both trusts. The surviving spouse distributes the deceased spouse's property to the beneficiaries designated in the 1st trust. If the beneficiaries are minors, then the surviving spouse can manage the property until they reach the age required by the trust document to receive the gift or the gift can be transferred to a custodial account under the Uniform Transfers to Minors Act, in which case, the beneficiaries will receive the gift when they reached the age of majority, which in most states, is either 18 or 21.

When all the property in the 1st trust is distributed, then it ceases to exist. Nothing needs to be done to terminate the trust — it terminates automatically when it is depleted of property.

When the surviving spouse dies, then the successor trustee assumes control of the trust and administers the trust according to the terms of the trust document. This would also happen if both spouses died simultaneously.

Because either spouse can terminate the trust without the other's consent, they should do so if they divorce, since, unlike a will, a living trust is not automatically revoked upon divorce in most states.