Estate planning guide
How a Marital Trust Works
Provide for your surviving spouse and still decide who receives what is left.
Why it matters
Two goals that can pull apart
Most married couples want two things from an estate plan: take care of the spouse who survives, and make sure what is left eventually reaches the children. Usually those goals fit together. Sometimes they pull apart, especially when there are children from an earlier marriage, a large estate, or a spouse who is not a U.S. citizen.
A marital trust is one of the tools that can hold both goals at once. Here is what it is, how it fits inside a living trust, and when California couples use one.
Marital trusts are not only for very wealthy couples. With the federal estate tax exemption where it is now, many couples who use one do it for control rather than taxes: to make sure a surviving spouse is cared for and that the first spouse’s share eventually reaches the people that spouse chose.
What a marital trust is
A marital trust is a trust for the benefit of a surviving spouse, usually created when the first spouse dies. Instead of passing to the survivor outright, the first spouse’s share goes into a trust that provides for the survivor. When the survivor later dies, what remains passes to beneficiaries the first spouse chose, often the children. For most couples, the marital trust is not a separate document. It is written into the couple’s living trust and comes into existence only at the first death.
How it fits inside a joint living trust
Many married couples in California sign one joint revocable living trust. While both spouses are alive, they can change it. When one spouse dies, the trust can divide. The survivor’s share stays fully under the survivor’s control, and the deceased spouse’s share can be held in one or more trusts whose terms can no longer be changed. Because California is a community property state, each spouse generally controls only their own half of the community property at death, so a marital trust holds the deceased spouse’s share, not the survivor’s.
Protecting children from an earlier marriage
This is one of the most common reasons couples use a marital trust. If everything passes outright to the survivor, the survivor can later leave it to anyone, including a new spouse or only their own children. A marital trust lets the first spouse provide for the survivor while deciding now who receives what is left. Our guide to estate planning for blended families covers this in more detail.
The estate tax side
Federal law generally lets a spouse leave any amount to a surviving spouse who is a U.S. citizen without estate tax. This is the marital deduction. A particular kind of marital trust, often called a QTIP trust, can qualify for that deduction while still controlling who inherits after the survivor. It generally must pay the survivor all of its income for life. California does not have its own estate tax. The federal exemption is now high enough that most families will not owe federal estate tax, but larger estates still plan around it, and the exemption amount can change.
Portability of the unused exemption
When the first spouse dies, the unused part of that spouse’s federal estate tax exemption can generally be passed to the survivor. This is called portability. It is not automatic: the deceased spouse’s estate generally must file a federal estate tax return on time to claim it, even when no tax is owed. For couples whose combined assets could approach the exemption, that filing is worth discussing soon after the first death.
When a spouse is not a U.S. citizen
The unlimited marital deduction generally does not apply when the surviving spouse is not a U.S. citizen. A special trust, called a qualified domestic trust, can preserve the deduction if it meets federal requirements and the right election is made on the estate tax return. If either of you is not a U.S. citizen, tell us at the start so the plan can account for it.
The tradeoffs
A marital trust adds protection, but it also adds structure:
The deceased spouse’s share becomes irrevocable, so the survivor cannot rewrite those terms.
The trust may need its own tax identification number, tax returns, and records.
Assets in a bypass trust, a related trust kept out of the survivor’s taxable estate, generally do not get a second step-up in basis when the survivor dies. A QTIP trust is treated differently. Our guide to the step-up in basis after a spouse dies explains why that matters.
Leaving room to decide later
Some plans leave the decision until the first death. With a disclaimer-based design, the survivor has a limited window after the first death to decide whether to send some property into a trust. Other designs let the trustee make tax elections after the first death. The right approach depends on the size of the estate, the family, and how much flexibility the two of you want.
Talk with us
Montanez Yu prepares complete estate plans for individuals and families throughout California, including revocable living trusts, wills, powers of attorney, and advance health care directives. Estate planning consultations are free, and every plan is a flat fee, quoted in writing before we begin. Call (951) 444-7407 or request a free consultation.
This guide is general information about California law, not legal advice for your situation. Reading it does not create an attorney-client relationship.