When married couples establish a joint revocable trust, it often becomes the primary estate planning tool used to manage and eventually distribute nearly all of their shared assets. These trusts are created and governed by both spouses through a single trust agreement, and they may include provisions for handling incapacity, asset management, and post-death distributions.

However, many clients and families wonder what happens to this trust after the death of one spouse. Can the surviving spouse amend or change the trust? The answer depends on several factors, including how the original agreement was drafted, the types of subtrusts it creates, and what powers are granted to the surviving spouse.

When Does the Joint Trust Become Irrevocable?

Typically, when the first spouse passes away, the trust becomes irrevocable with respect to that spouse’s property. This includes their separate assets and their share of any jointly owned or community property. A survivor’s trust is usually created at this point, funded with the remaining spouse’s assets and share of community property.

What Happens to the Deceased Spouse’s Assets?

The deceased spouse’s portion of the trust may be allocated to marital and nonmarital shares, often for tax or estate planning purposes. These shares can be used to fund separate trusts, such as QTIP (Qualified Terminable Interest Property) or credit shelter trusts. Once funded, these subtrusts are irrevocable.

In some cases, the trust may give the surviving spouse powers such as a general or limited power of appointment. These powers allow the spouse to direct how the trust assets will be distributed upon their death, which can effectively allow them to reshape the estate plan within certain limits.

Survivor’s Trust and Control

The survivor’s trust, made up of the surviving spouse’s assets, often gives the surviving spouse broad powers to amend or revoke its terms. This can include full control over income and principal. If the deceased spouse’s assets are combined into the survivor’s trust, the surviving spouse may be able to withdraw those funds or redirect them.

Real-Life Scenarios

In one example, a surviving spouse used their powers of appointment to revise the trust terms to better protect the deceased spouse’s children. In another case, the surviving spouse redirected all trust assets to a charity, leaving nothing for the deceased spouse’s children.

These outcomes show how important it is to carefully draft trust agreements. The powers granted to the surviving spouse, especially regarding withdrawal rights and powers of appointment, can drastically alter the eventual distribution of the estate.

Consider Separate Trusts

Because of the complexity and the potential for unexpected outcomes, some estate planners recommend establishing separate trusts for each spouse instead of a joint trust. This can provide clearer boundaries and help ensure that each spouse’s wishes are preserved after death.

At Enoch Tarver, we guide married couples through these crucial decisions and help design trust agreements that align with their values, family goals, and financial needs.

If you are considering a joint trust or need to review your existing estate plan, contact Enoch Tarver today to schedule a consultation. We are here to protect your legacy.

Reference:
American Bar Association. (2024, April 1). Can a surviving spouse amend a joint trust agreement? https://www.americanbar.org/groups/real_property_trust_estate/publications/estate_planning/articles/surviving-spouse-amend-joint-trust/