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A spousal trust is a legal arrangement where an individual or entity holds a spouse’s assets and provides a way for them to give income and assets to their spouse when they die. The surviving spouse is the beneficiary. It can protect assets from falling into another person’s hands through remarriage and can be useful for planning the distribution and protection of assets in blended families. There are specific requirements for setting up a spousal trust.
Married people often provide for each other while both are alive. A spousal trust is a legal arrangement whereby an individual or entity holds a spouse’s assets and provides a way for him or her to give income and assets to the spouse when the spouse dies. The surviving spouse is the beneficiary of this type of trust. While such a trust can be established to provide income and pay expenses after the death of a spouse, a spousal trust can also provide for other parties, such as children of the deceased spouse or the grantor.
The reasons a person may create a spousal trust vary. For example, an individual may create one to provide income for their spouse after their death. Another person can create one to provide for his spouse and secure her assets for her children once both spouses are dead. While a spousal trust may give income to the surviving spouse, it can be constructed to leave all trust assets to the grantor’s children once both spouses have died.
This type of trust can be useful for protecting assets in the event that the surviving spouse remarries. In the absence of a spousal trust, the new spouse may attempt to obtain money or assets from the surviving spouse’s estate if the couple divorces or the surviving spouse dies. A spousal trust, however, can protect the grantor’s assets from falling into another person’s hands simply through remarriage.
Some people also find spousal trusts useful for planning the distribution and protection of assets in blended families, which are families involving stepchildren. For example, a grantor may want to leave her assets to his biological or adopted children rather than to his stepchildren. At the same time, you may not want to leave your spouse with no income. In that case, you can set up a trust, which allows you to use your assets for the benefit of the surviving spouse as long as the latter is alive. However, you can arrange for all assets held in the trust to go to your biological or adopted children once your surviving spouse dies.
There are some specific requirements for setting up a spousal trust. For example, all trust proceeds must go to the surviving spouse; the grantor cannot split the income among several people. Another requirement is that someone pays income tax on the assets in the trust. While the grantor is alive, he is liable for taxes according to the laws of his country. After her death, the surviving spouse is usually responsible for income taxes.
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