Protect Your Assets With a Marital Deduction Trust

7:31 am Uncategorized

The IRS’ marital deduction allows a spouse to pass on assets to the surviving spouse without those assets being taxed.

A marital deduction trust is created to protect the assets of both spouses from federal estate taxes when they die.  So how does a marital trust work?

When the first spouse dies – let’s say the husband – his assets pass not to his surviving wife but to the marital deduction trust and no federal estate taxes are due.  While the wife is still living, the trust generates income for her.  When she dies, the assets in the marital deduction trust are not part of her estate, so are therefore not subject to federal estate taxes.

To qualify for a marital deduction trust:

  • The surviving spouse must be the only beneficiary of the trust during his or her lifetime
  • The surviving spouse must have unrestricted power over how the trust assets are bestowed upon his or her death
  • All trust income must be given to the surviving spouse on an annual basis during his or her lifetime
  • The trust must specify who will receive the trust assets upon the death of the surviving spouse

A trustee must also be appointed, and all the assets in the trust must be specified in the trust document.

For more information on marital deduction trusts and California estate planning, contact our Newport Beach estate planning law firm.

Let our Costa Mesa law offices help you get started by contacting us today.

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