How to Define a Dual Living Trust

A dual living trust is often used as a financial fix than for estate planning. It goes by several names, but the purpose is the same. The dual living trust provides protection from estate taxes after one or both spouses die. It can also protect the equity in your home from creditors.

Difficulty: Moderately Challenging

Instructions

1. Know your worth. Dual living trusts only have benefits for those with assets above what is allowed for estate tax exemptions and credits. The setup and maintenance costs associated with the trust are often greater than the tax benefit if the estate is already eligible for estate tax exemptions.

2. Protect the assets in the event of a spouse's death by setting up a dual living trust. The trust becomes irrevocable after one spouse dies and is therefore protected from creditors. If the home is a part of that trust, it cannot be sold and can't be taken by creditors.

3. Avoid estate taxes for the beneficiaries only if the trust stays below the exemption limits. The amount that is over the exemption amount is open for taxation. The purpose of the trust is to break up the assets so that they fall below those limits.

4. Protect your spouse after you are gone. The surviving spouse can live on the revenues and interest generated from the assets. Living and health expenses are also allowed. The assets are not held up in probate, so the surviving spouse can have immediate access to the income generated.

Tips & Warnings

• The assets in trust cannot be changed by the surviving spouse. They are "tied up" until they pass on to the beneficiaries. For this reason, dual living trusts are not recommended for couples under the age of 60.
• The surviving spouse can do as she pleases with the assets she has in trust. Those assets are revocable until they pass to the beneficiaries.
• Hire an attorney, and for the surviving spouse, an accountant. The two trusts are considered separate as long as there is a surviving spouse and must be kept that way. The deceased spouse's trust even has to have its own tax number.