The Most Common Living Trusts For Married Couples
Before we begin:
Definitions you will need to know:
1. Living Trust: A property right, held by one party for the benefit of another, that becomes effective during the lifetime of the creator and is, therefore, in existence upon his or her death.
2. Assets: property available for the payment of debts of a person or company in the event of insolvency or, in the case of a person, on death. Such property includes real estate and personal estate and property over which a person has a general power of appointment.
3. Beneficiaries: An organization or a person for whom a trust is created and who thereby receives the benefits of the trust. One who inherits under a will. A person entitled to a beneficial interest or a right to profits, benefit, or advantage from a contract.
4. Decedent: An individual who has died. The term literally means “one who is dying,” but it is commonly used in the law to denote one who has died, particularly someone who has recently passed away.
Most Common Living Trusts
AB or ABC Trust and Survivor’s Trust (w/ disclaimer options)
A Quick & Straightforward Overview:
- Both save money
- Both protect assets
- Both allocate your assets as you see fit.
1. AB or ABC Trust
While both spouses are alive, assets can be added or beneficiaries changed at any time. After the first spouse passes away, the assets are allocated based on the language set in the trust.
The assets are divided equally in to:
1. The A Trust (or Survivor’s Trust)
2. The B Trust (Bypass Trust)
3. The C Trust (or Q-Tip Trust: Qualified Terminable Interest Property)
Main distinction: After the passing of the first spouse, the assets are divided 50/50. One half to the survivor, and the other to the decedent. The survivor is free to use their half of the assets any way they choose. They are also free to use the assets in the B Trust, but they come with rules and regulations for their use. This is generally used when both spouses want to protect different beneficiaries (i.e. children from previous marriages), or they decide that regulations for the Survivor’s Trust are in both of their best interests.
2. Survivor’s Trust w/ disclaimer option
When one spouse passes away, 100% of the assets are given to the survivor in the Survivor’s Trust. The living spouse is in total control of the assets and how they are used. The disclaimer option is used for tax protection (but only if needed). This type of trust also allows the survivor to change beneficiaries at any time, even after the passing of the first spouse.
If you have any questions, please feel free to contact me. This is an important topic, and I want to make sure you have the proper information.
I am here to help.
Have a wonderful day.