A married couple establishes a joint trust with each contributing their share of their joint or community property (if any) and their own separate property to the trust. What happens to the property in the trust when the first spouse dies?
As a general rule, the surviving spouse’s share (i.e., their own separate property and one-half share of the joint or community property) simply transforms into the so-called Survivor’s Trust. As the name implies, this is the property that belongs to the survivor. The surviving spouse can continue to make changes to this portion of trust, including changing the beneficiaries etc., just like both spouses could during their joint lives.
The planning occurs when, while both spouses are alive, the couple decides what amounts are to be allocated to the survivor when the first one passes away. It might be that each wants the survivor to have full control of the estate at that time (i.e. control of the survivor’s and the deceased spouse’s share). How these allocations are made can impact taxes and how the property will ultimately be distributed.
An experienced estate planner can review and analyze these choices with the couple to ensure the plan meets the client’s needs and wishes.