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Estate planning and trusts: to fund or not to fund

Family situations can be complex. For example, an individual in a second marriage may want to provide for his or her spouse’s welfare, yet also leave a bequest to children from a previous marriage. 

Without estate planning, property held in a joint tenancy might still transfer to a spouse. From that point, however, the property might pass to the surviving spouse’s family and bypass the children from the first marriage altogether.

A marital trust is a type of trust that can accomplish specific objectives for an individual in his or her second marriage. A marital trust becomes active after the first spouse passes. When the first spouse dies, assets are moved into the trust according to the terms of the trust deed or agreement. Income from the assets in the trust is usually payable to the surviving spouse, while the principal in the trust is preserved for heirs, to be distributed usually after the surviving spouse passes.

Of course, an attorney can also help an individual modify a marital trust to fit the individual’s specific wishes. For example, the trust agreement can also empower the trustee to distribute principal payments to the surviving spouse from the trust. For couples that want to minimize estate taxes after the surviving spouse’s death, a credit shelter trust might also be used in conjunction with the marital trust.

Yet it can also be wise to have access to additional assets not placed in a trust, to cover for emergencies or other contingencies. An attorney can help an individual create a number of trusts to fit his or her unique situation. For more information, check out our firm’s estate planning page. 

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