Thousands of Orange County couples get married every year, seeking to start an enjoyable life together while also being able to take advantage of all the beauty and fun the coastal California area has to offer.
However, many of these newlyweds, perhaps even you, live their lives without a plan for how their spouse will continue to enjoy life once they pass on. If that’s the case, a knowledgeable estate planning attorney can guide you through the specific types of trusts and help you choose the right one.
In Orange County, an estate planning attorney from OC Wills & Trust Attorneys can help you build a solid vision for your future. Contact us for a free consultation today to ensure your estate planning efforts start off on the right foot.
What Is a Marital Trust?
A marital trust, sometimes referred to as a spousal trust, is an agreement between two partners that allows a deceased spouse’s assets to be transferred to their surviving spouse upon their passing. In a marital trust, these assets are passed on tax-free, which means there are no estate taxes placed on them by the IRS.
As the sole beneficiary, the surviving spouse is able to receive income generated from the assets in the trust throughout their lifetime. In some cases, when permission is given, the surviving spouse may also receive principal payments (the assets that were initially put into the trust).
How Marital Trusts Are Used
The setup of any marital trust involves at least three parties: a guarantor who establishes it, a trustee who manages it, and a beneficiary who receives the assets when the guarantor passes away. You can put anything of value into a marital trust, including physical property (such as a house or car) or an investment portfolio.
The guarantor must first create the trust by filing a legal document that specifies all of the assets to be transferred into it. Because marital trusts are irrevocable, this part of the process is best handled with the help of an estate planning lawyer. With them by your side, you can ensure that everything runs smoothly and that costly mistakes are avoided.
Once established, the marital trust will go into effect once the guarantor passes away, and the trustee will manage it. However, the surviving spouse will have general power of appointment to instruct the trustee to transfer income and assets within the set terms of the trust.
The Benefits and Importance of Spousal Trusts
Marital trusts have many benefits for couples and their families. For one, they allow surviving spouses to avoid appearing in probate court at such sensitive times in their lives. They also ensure that surviving spouses are taken care of by providing a form of income.
Additionally, establishing a marital trust helps to minimize tax implications for high-net-worth individuals by providing a federal tax exemption for assets. It also protects assets from both creditors and future spouses of the surviving spouse, ensuring the guarantor’s wishes are respected and assets stay in the family.
Finally, assets within the marital trust can be passed on to other beneficiaries (such as the couple’s children) once the surviving spouse passes away. That, in turn, provides even more financial stability while also ensuring that assets remain within the family.
Important Considerations for Establishing a Trust
It is essential to keep in mind that when the surviving spouse dies, the IRS will tax the remaining assets. The good news is that current tax laws allow an individual to shield almost $13 million from estate taxes. With two spouses involved in the trust, an estate planning attorney may also be able to help you double that tax exemption to nearly $26 million.
Nevertheless, tax laws change over the course of a lifetime. In fact, the federal gift and estate tax exemption is set to change at the beginning of 2026. With that in mind, you may want to build a relationship with an estate planning lawyer who can help all parties navigate these changes in just a few years.
Couples also need to keep in mind that there are different types of marital trusts. Qualified Terminable Interest Property Trusts, Bypass Trusts, and Spousal Lifetime Access Trusts all have distinct rules and regulations attached, so it is important to work with an estate planning attorney before making a final decision. And because marital trusts are irrevocable, it is extremely difficult to change one’s terms once it is set.
Contact an Orange County, CA, Estate Planning Attorney at OC Wills & Trust Attorneys Today
Establishing any form of trust to secure your family’s financial future is a significant endeavor, which means couples need to ensure it is done right the first time. If you are ready to get started with the estate planning process for your Orange County family, we want to help.
Get in touch with an estate planning attorney at OC Wills & Trust Attorneys for a free consultation, and let us use our in-depth knowledge of the law to provide you with the best options for your needs and help you take the next steps to ensure your family thrives.
