Living Trusts & Surviving Spouses
Spouses can create a living trust to benefit children and relatives as well as protect assets for future generations. Once funded with assets, a living trust is a legally recognized tax-paying entity. It receives protection from creditors and cannot be revoked by a beneficiary or third party.
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Identification
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Frequently, a trust grantor sets up a living trust to pass on heirloom property, stocks and bonds, collectibles, real estate and investment accounts to heirs and beneficiaries. A beneficiary of a living trust can be a minor or adult child or relative of a family group, for example. By transferring ownership of an asset into a living trust, a trust grantor can avoid probate and minimize federal and state gift taxes for himself and the heirs who benefit from trust property.
Roles
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When spouses jointly set up a living trust, both are trustees. This means they jointly control the living trust. Think of either task as a link in a chain. Like an individual who creates a business plan to start a business, a trust grantor creates a trust deed to start a living trust. Once the living trust is funded with assets, the trustee manages the daily operation of that trust in the same way a business owner manages the daily operation of a business.
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Function
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In most cases, when one spouse dies, the surviving spouse becomes the "successor trustee." As the title suggests, a successor trustee is an individual who succeeds an original title. In other words, the surviving spouse succeeds the jointly managing spouse to solely control the trust. It would be uncommon for a surviving spouse not to act as a successor trustee, as she has been acting as a trustee and, thus far, managing the trust.
Duties of a Successor Trustee
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Acting as successor trustee, a surviving spouse must administer trust property in accordance with the original trust deed. This means, the surviving spouse must bring a return on trust property, distribute trust property to minimize tax obligations and file annual federal and state taxes on behalf of the trust.
Irrevocability of a Living Trust
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When a trust grantor dies, the trust becomes irrevocable, meaning the surviving spouse cannot amend or re-state the original trust document. This includes adding or removing beneficiaries and transferring real estate property into and out of the trust.
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