Marital trusts have multiple benefits for beneficiaries, including asset allocation and tax benefits. They are worth looking at in your estate plan.
Forbes’ recent article entitled “Guide To Marital Trusts” says that a marital trust is an irrevocable trust that allows you to transfer a deceased spouse’s assets to the surviving spouse without paying any taxes. The trust also protects assets from creditors and future spouses that the surviving spouse may encounter.
When the surviving spouse dies, the assets in the trust aren’t included as part of their estate. That will keep the taxes on their estate lower.
There are three parties involved in setting up, maintaining and ultimately passing along the trust, including a grantor, who is the person who establishes the trust; the trustee, who’s the person or organization that manages the trust and its assets; and the beneficiary. That’s the person who will eventually receive the assets in the trust, once the grantor dies.
A marital trust also involves the principal, which are assets initially put into the trust.
A marital trust doubles the couple’s estate tax exemption limit, especially when almost all assets are owned by one spouse. Estate tax refers to the federal tax that must be paid on someone’s estate after they die. The estate tax limit is how much of an estate will be tax-free. In 2022, the estate tax limit is $12.06 million, which means utilizing a marital trust would essentially double that amount to $24.12 million. Therefore, about $24 million of a couple’s net worth would be shielded from estate taxes by taking advantage of a marital trust.
A marital trust is also beneficial because it can provide income to the surviving spouse, tax-free.
Only a surviving spouse can be a beneficiary of a marital trust. When the surviving spouse dies, the trust will then be passed on to whomever the first spouse’s will or trust governs.
If keeping wealth within your family after you die is important, then a marital trust is an estate planning tool that will make certain that individuals outside of your family don’t have access to the wealth. You can put a variety of assets into a marital trust, including property, retirement accounts and investment accounts.
It’s also one legal tool to consider using when planning for a blended family.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Forbes (June 30, 2022) “Guide To Marital Trusts”