Many married couples share nearly everything, including their finances, which is often reflected in their estate plan through a joint living trust rather than two separate ones. While separate trusts offer more flexibility, a joint trust can be structured so that, upon one spouse’s passing, the trust splits into two subtrusts: a survivor’s trust and a decedent’s trust.
This arrangement gives the surviving spouse the flexibility typically found in dealing with separate trusts. The surviving spouse maintains full control over the survivor’s trust, though their control over the decedent’s trust, which holds the deceased spouse’s assets, may be more limited.
Survivor’s Trust and Decedent’s Trust
A survivor’s trust strikes a balance between a joint trust and separate trusts. When a couple combines their assets into a joint revocable living trust, both spouses usually serve as trustees and beneficiaries. Upon the passing of one spouse, the joint trust can be divided into subtrusts.
One of these subtrusts is the survivor’s trust, which the surviving spouse controls. The other, the decedent’s trust, holds and manages the deceased spouse’s assets according to their specific instructions.
How a Survivor’s Trust Works
In a typical joint trust, assets are categorized into four types:
- Joint assets
- Community property
- First spouse’s separate property
- Second spouse’s separate property
When the first spouse passes, the survivor’s trust receives half of the community property, half of the joint property, and all of the surviving spouse’s separate property. The deceased spouse’s share of the community and joint property, along with their separate property, is usually placed into the decedent’s trust, which follows its own set of instructions. Alternatively, the trust agreement might direct all of the deceased spouse’s assets into the survivor’s trust instead of creating a separate subtrust.
Benefits of a Survivor’s Trust
The key difference between a survivor’s trust and a decedent’s trust lies in their revocability. A survivor’s trust remains revocable, giving the surviving spouse full control. They can modify the terms, add or remove assets, change beneficiaries, appoint new trustees, or even terminate the trust entirely.
On the other hand, the decedent’s trust is irrevocable, meaning the surviving spouse, while potentially a beneficiary, has limited control over its management. This allows the deceased spouse to protect their assets and ensure their wishes are followed, even after their passing. For example, they can safeguard against changes if the surviving spouse remarries, ensuring that remaining assets go to predetermined beneficiaries after the survivor’s passing.
The primary purpose of any trust is to provide for loved ones and protect assets from costly probate and taxes. If you’re looking to create an estate plan that meets your specific needs, our estate planning attorneys can help. Schedule an appointment today to discuss your options.
